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

Payments due for statutory annual leave, including a payment in lieu of untaken leave on termination, are holiday pay or an emolument payable in connection with employment. They are therefore “wages” within section 27(1)(a) of the Employment Rights Act 1996.

An employer's failure to pay such a liquidated sum may be pursued as an unauthorised deduction from wages under section 13. The worker may consequently use the complaint and time-limit regime in section 23, including its provision for a series of deductions. That remedy is available in addition to a complaint under the Working Time Regulations 1998.

The same result is supported by the EU principle of equivalence. Statutory paid annual leave is sufficiently similar to contractual holiday pay and other wage claims that it should not receive a less favourable limitation regime.

The appellants were former employees of the Revenue. Most had been absent on long-term sick leave. They claimed entitlement to annual leave and holiday pay under the Working Time Regulations 1998, including a payment in lieu when employment ended.

The Employment Appeal Tribunal upheld the relevant claims. The Court of Appeal reversed that result in [2005] EWCA Civ 441, holding both that the appellants had no relevant entitlement and that payments under the Regulations could not be claimed as unauthorised deductions from wages under the Employment Rights Act 1996.

After a reference from the House, the Court of Justice ruled on the annual-leave issue in terms favourable to the employees. The remaining domestic issue was whether payments due under regulations 14 and 16 of the Regulations fell within the statutory definition of “wages”, so that the section 23 series-of-deductions time limit was available.

1. The appeals were allowed unanimously. Lord Hope and Lord Brown agreed with the opinions of Lords Rodger, Walker and Neuberger. The House set aside the Court of Appeal's order and restored the Employment Appeal Tribunal's order.

2. Lord Walker recorded that, following the Court of Justice's ruling in the joined references, the Court of Appeal's contrary conclusion on annual leave could not stand. The employees' statutory entitlement therefore succeeded.

3. Lord Rodger held that a payment under regulation 14 is earned by the worker's service during the relevant proportion of the leave year. Although payable only on termination, it is not compensation for termination in the sense considered in Delaney v Staples, [1992] 1 AC 687. It is consideration for services already performed. It falls within the ordinary meaning of wages and within the broad words of section 27(1)(a): a sum payable in connection with employment, as holiday pay or an emolument, whether payable under the contract or otherwise.

4. Lord Walker and Lord Neuberger reached the same construction. The words “or otherwise” are not confined to obligations existing when the Act was enacted, or to terms implied into a contract. They encompass statutory holiday payments under the Working Time Regulations 1998. The specific statutory inclusions and exclusions in section 27 did not justify reading down its broad opening language.

5. The payment was liquidated. Accordingly, non-payment could constitute a deficiency treated by section 13(3) as an unauthorised deduction. A worker could complain under section 23 as well as under regulation 30. Lord Rodger further held that section 205(2) merely directs a section 13 complaint to the employment tribunal; it does not make regulation 30 unavailable.

6. Lord Walker and Lord Neuberger also treated the EU principle of equivalence as an independent supporting basis. Regulation 30 lacked the section 23(3) facility for a series of deductions. Contractual holiday pay and comparable employment payments were sufficiently similar claims for that less favourable treatment to be impermissible.

• House of Lords: Allowed the appeals, set aside the Court of Appeal's order and restored the Employment Appeal Tribunal's order.

• Court of Justice of the European Union: On a reference made by the House, ruled on the annual-leave issue in favour of the former employees in the joined references, including Stringer v HM Revenue and Customs, [2009] IRLR 214.

• Court of Appeal: Had allowed the Revenue's appeal in [2005] EWCA Civ 441, also reported at [2005] ICR 1149.

• Employment Appeal Tribunal: Its order in favour of the employees was restored.