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Davies and others v MJ Wyatt (Decorators) Ltd IDS Brief 670 (EAT 13/7/00)
The schemes that employers think up for avoiding their obligation to pay for holidays are seemingly endless. Few, if any, work.
Mr Davies and his colleagues were decorators. Their employer deducted money from their wages to pay into a holiday fund, out of which a flat rate was paid to them for annual holiday. When the Working Time Regulations came into force on 1 October 1998, they became entitled to paid annual leave based upon their normal week's pay. Their employer's response was to meet the additional cost by making a unilateral pay cut of 30 pence per hour.
The Employment Appeal Tribunal said that the employer's actions amounted to an unlawful deduction from wages. There had been no agreement. The employers were not entitled to make a unilateral change. Neither did the reduction discharge the employer's obligation under the Regulations to provide paid holidays.
Many employers have sought to get round the requirement for paid annual leave by reducing pay rates. This will be a breach of contract and an unlawful deduction if the reduction is not agreed by the worker.
There have also been cases where employers have argued that a higher hourly rate to contract workers amounts to "buying out" or paying for annual leave, even where no payment is made for leave itself and their is no payment on termination for leave accrued but not taken. This argument has been rejected in Tribunals, as in Pitt and others v Driving Standards Agency, (ET Nottingham, October 2000), where again it was found to be an unlawful deduction.