L Lloyd v Elmhurst School Limited

For salaried-hours work, a worker’s basic hours under regulation 21(3) of the National Minimum Wage Regulations 2015 must be ascertained exclusively from the contract. The inquiry is not into the hours actually worked.

Basic hours may include contractual, fully paid periods of absence. They are not confined to absence from periods when the worker would otherwise have been obliged to work. The regulations expressly contemplate non-working basic hours and provide for deduction where contractual salary may be reduced during absence.

An employment tribunal therefore errs if it disregards a contractual entitlement to paid holidays because the worker did not perform work during them. It must construe the contractual entitlement and determine the annual hours for which salary is contractually due.

The claimant was a part-time learning support assistant employed by a school. She worked 21 hours a week during term time and received an annual salary in equal monthly instalments. Her contract entitled her, subject to a limited qualification, to the usual school holidays as holidays with pay.

She claimed an unlawful deduction from wages, alleging payment below the national minimum wage. It was agreed that she performed salaried-hours work under the National Minimum Wage Regulations 2015.

The Employment Tribunal dismissed the claim. It treated her basic hours as 21 hours over 40 weeks, comprising 36 term-time weeks and four weeks of statutory leave. The central issue on appeal was whether her contractual paid school holidays formed part of her annual basic hours.

1. Appeal allowed in substantial part. The Employment Tribunal erred by determining basic hours from the periods in which the claimant in fact worked, supplemented by statutory annual leave. For salaried-hours work, regulation 21(3) of the National Minimum Wage Regulations 2015 requires the hours for which salary is contractually payable in a year to be specified or ascertained solely from the contract. Regulation 22(5) reinforces that conclusion.

2. Basic hours are not limited to working hours. Regulation 21(7)(a) expressly permits salaried-hours work where not all basic hours are working hours. Regulations 23 and 26 also proceed on the basis that contractually paid absences may form part of basic hours. Periods of contractual holiday at normal pay can therefore count even where they are not absences from time when the worker would otherwise have been required to work.

3. The proposed distinction between absence from an otherwise working period and absence during a non-working period had no support in regulation 21(3). Where the regulations require the counterfactual inquiry whether a worker would otherwise be working, they say so expressly. The detailed rules considered in [2021] ICR 758 concerning sleep-in work did not assist the distinct question of basic hours.

4. Clause 4 of the contract, providing for school holidays with pay, was consequently central. The Tribunal did not construe it. Its treatment of the claimant as term-time only, and its inclusion of statutory leave despite the contract not incorporating that entitlement, did not answer the contractual question required by the regulations.

5. The error concerning four rather than 5.6 weeks’ statutory leave was immaterial, because correcting that figure could not alter national-minimum-wage compliance on the Tribunal’s approach. That ground was dismissed.

6. The matter was remitted to a differently constituted Employment Tribunal to determine the claimant’s unlawful-deductions claim in accordance with this judgment. A substituted decision was inappropriate because further factual matters relevant to the calculation remained unresolved.

• Employment Appeal Tribunal: Allowed grounds 1, 2 and 3 of the claimant’s appeal; dismissed ground 4; and remitted the claim to a differently constituted Employment Tribunal.
• Employment Tribunal: Written reasons sent on 8 December 2021. The Tribunal dismissed the claimant’s unlawful-deductions claim, treating her basic hours as 21 hours over 40 weeks.