L Lloyd v Elmhurst School Limited

The appeal concerned the correct method of ascertaining a worker's "basic hours" where the worker performs "salaried hours work" under the National Minimum Wage Regulations 2015 (NMWR). The Employment Tribunal had treated the claimant's basic hours as the hours she actually worked in term time (36 weeks) plus statutory leave, producing a 40-week divisor. The EAT held that "basic hours" are to be ascertained from the contract (regulation 21(3)) and may include periods of contractual paid absence which are not working hours. The Tribunal erred by focusing on weeks actually worked rather than the contractual entitlement to paid holidays (clause 4). The appeal was allowed on the principal grounds and the matter remitted to a differently constituted employment tribunal for further factual determinations.

This was an appeal from an Employment Tribunal judgment dismissing a claim for unlawful deduction from wages (national minimum wage shortfall). The claimant, a part-time learning support assistant, worked three days (21 hours) a week in term time and received her salary in equal monthly instalments; clause 4 of her contract entitled her to the usual school holidays as holidays with pay.

The claim raised three issues: (i) the pay reference period (one month), (ii) total annual gross pay (£8,568), and (iii) the hours to count in each pay reference period. The key dispute was whether the claimant's annual "basic hours" should be calculated over 52 weeks (21 hours × 52) because contractual paid holidays formed part of the basic hours, or over 40 weeks (term weeks plus statutory leave) as the respondent and Tribunal concluded.

The EAT analysed the NMWR framework, emphasising that regulation 21(3) requires ascertainment of "basic hours" from the contract and that regulation 21(7) contemplates that basic hours may include non-working hours. The Tribunal had wrongly focused on when the claimant in fact worked (term time only) and treated contractual holidays as non-counting unless they were absences from periods when the worker would otherwise be required to work. The EAT rejected that counterfactual limitation, holding that where a contractually paid absence exists the hours attributable to that paid absence can form part of basic hours unless excluded by regulations such as regulation 23 (which allows deduction where salary is reduced for an absence).

The EAT allowed the appeal on grounds 1–3 (Tribunal's misinterpretation of contract and regulations) but dismissed ground 4 as immaterial (the Tribunal's numerical calculation of statutory leave as four weeks rather than 5.6 weeks). Rather than substituting a final figure, the EAT remitted the case to a different employment tribunal for determination of outstanding factual matters (for example, timing of contract variation to three days, any periods of reduced pay under regulation 23), in accordance with its statutory and case-law powers.

Appeal allowed. The EAT held that where a worker performs salaried hours work the "basic hours" under regulation 21(3) are to be ascertained from the contract and may include hours attributable to periods of contractual paid absence (such as contractual holidays) even if those periods are not hours the worker in fact works. The Employment Tribunal had erred by focusing on weeks actually worked and by failing to construe clause 4 of the contract as part of the statutory ascertainment. The case is remitted to a differently constituted employment tribunal for further factual determination consistent with this legal analysis.

Employment Tribunal (Employment Judge Burge, J Cook and S Gooden) dismissed the claimant's unlawful deduction claim; written reasons sent 8 December 2021. Notice of Appeal to the EAT sealed 11 March 2022; permission to appeal granted by Heather Williams J. Appeal heard at the EAT and judgment handed down 24 January 2023 ([2022] EAT 169).