Bear Scotland Ltd v Fulton (Hertel (UK) Ltd v Woods (Secretary of State for Business, Innovation and Skills intervening))

Paid annual leave must reflect normal remuneration, not merely basic salary. Payments regularly received and directly linked to work required under the contract form part of that remuneration. This includes non-guaranteed overtime where the worker must work it when required, and taxable payments for time spent travelling to work; genuine occasional or ancillary expenses remain excluded. The Working Time Regulations 1998 must be interpreted, so far as possible, consistently with Article 7. For unlawful-deduction claims, a series requires sufficient factual and temporal linkage; a gap exceeding three months breaks the series. Contractual normal hours depend on objective construction at the date of agreement.

Three conjoined appeals arose from Employment Tribunal findings that employers had underpaid holiday pay by excluding overtime and other payments. Hertel and Amec also challenged findings concerning unlawful deductions and payment in lieu of notice. Their claimants cross-appealed on radius allowance and travelling time payment. The central questions concerned Article 7 of the Working Time Directive, conforming interpretation of the Working Time Regulations 1998 and the Employment Rights Act 1996, the meaning of a series of deductions, contractual normal hours, and whether taxable travel-related payments formed part of normal remuneration.

1. Paid annual leave. The appeals failed on the first two issues. Article 7 requires remuneration during annual leave to correspond to normal remuneration. The relevant question is whether a payment is normally received over a representative period and has a direct or intrinsic link with tasks the worker is required to perform. Non-guaranteed overtime was regularly required in the Hertel and Amec cases and therefore had to be included, although the employers were not obliged to offer it. The reasoning in Williams and Lock was applicable to the Working Time Directive; the latter is reported at [2014] ICR 813.
2. Conforming interpretation. The Marleasing obligation permitted the Working Time Regulations 1998 to be construed consistently with Article 7. The earlier decision in Bamsey, reported at [2004] ICR 1083, remained relevant to wholly domestic additional leave under regulation 13A, but did not prevent a conforming construction for regulation 13 leave. Regulation 16(3)(d) was to be read as excluding sections 223(3) and 234 for regulation 13 entitlement.
3. Series of deductions. Whether deductions form a series is a question of fact. There must be sufficient similarity of subject matter and factual linkage, together with sufficient frequency and temporal linkage. In the statutory context, a gap of more than three months breaks the series and the Tribunal’s jurisdiction cannot be revived by a later deduction. Hertel and Amec therefore succeeded to that extent.
4. Contractual normal hours. Normal working hours and PILON depended on objective construction of the agreements at the date they were made. Regular performance alone did not establish an employer obligation to provide 44 hours. The Hertel and Amec appeals succeeded on this contractual issue.
5. Travel-related payments. The taxable elements of radius allowance and travelling time payment remunerated time spent travelling to work. They were directly linked to the work and were not merely ancillary travel expenses. The cross-appeal succeeded. Bear Scotland’s claims were remitted to the Employment Tribunal for further procedure.

• Employment Tribunal, Glasgow: Employment Judge Kearns found that Bear Scotland had made unauthorised deductions by excluding overtime and other payments from holiday pay. The series issue was left for later determination.
• Employment Tribunal, West Burton: Employment Judge Camp found that Hertel and Amec had underpaid holiday pay, breached obligations concerning PILON, and excluded payments later held to form part of normal remuneration.
• Employment Appeal Tribunal: The conjoined appeals failed on the scope of Article 7 and conforming interpretation. Hertel and Amec succeeded on unlawful deductions and PILON. The cross-appeal on radius allowance and travelling time payment succeeded. Bear Scotland’s claims were remitted.