Under the Spotlight Case Review

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Mark Hammerton

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Head of Employment

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Date: 27/09/12

In this issue we look at recent cases on freedom of information, holiday pay and the national minimum wage. 

Trago Mill (South Devon) Ltd v Information Commissioner and Another

If a party submits a Freedom of Information Request, is a severance agreement exempt from being disclosed under the Freedom of Information Act 2000 exemptions? 

Yes, in certain circumstances.  In the case of Trago Mills (South Devon) Ltd v Information Commissioner and Another, the Information Rights Tribunal (IRT) held that a Council was entitled to refuse part of a Freedom of Information (FOI) request concerning a severance agreement with a senior employee.  This was because it constituted personal data of the individual named in the severance agreement, and to disclose it would have been contrary to data protection principles. 

In this case, Trago Mills had been refused planning permission by the Council, and viewed a senior employee in the planning department as being biased in refusing their applications.  Trago Mills made a FOI request, including a copy of the severance agreement as evidence of the employee being paid off for alleged misconduct and for his silence due to the confidentiality provisions.  

The Council provided a redacted copy of the employee’s employment contract but refused to disclose any other information, on the basis it was exempt third party personal data.  Trago Mills filed a complaint with the Information Commissioner, but the Information Commissioner concluded that the exemption in relation to personal data applied, and the Council was entitled to refuse to provide the severance agreement.  The Commissioner considered the fact that the employee held a senior public sector role, and therefore his reasonable expectations of privacy may be less than would otherwise be the case, but concluded that the employee’s right to privacy outweighed the argument for disclosure. 

Trago Mills appealed to the IRT, which held that the Council’s duty to be accountable and transparent regarding public funds expenditure was outweighed by the employee’s right to expect privacy in connection with the severance agreement and the termination of his employment.  Of importance, was a bundle of documents supplied by the Council showing that the employee’s severance package was not influenced by any alleged misconduct or performance issues, and therefore it was not in the public interest for its contents to be disclosed.  But even if there had been evidence of the employee’s wrongdoing in public office, this would only support a legitimate public interest if the wrongdoing had been so serious that the Council should have taken it into account when considering the employee’s application for early retirement.

This case therefore suggests that not all severance agreements are exempt from being disclosed if requested under FOI requests.  It will depend if there is evidence to suggest the circumstances of the severance agreement are of legitimate public interest such as alleged wrongdoing in public office; on the seniority of the employee in connection with transparency of spending public funds; and whether all of this outweighs the individual’s right to privacy of personal data.

 

NHS v Larner

The Court of Appeal considered whether an employee, who was off sick for over a year, was entitled to a payment in lieu of notice in respect of untaken accrued annual leave when her employment terminated, despite not making a request to carry her untaken leave into the next leave year.

The Facts

Ms Larner was employed by NHS Leeds as a clerical officer.  NHS Leeds’ holiday year ran from 1 April to 31 March each year. 

Guidelines were issued by NHS Leeds in May 2004 advising staff that (i) they should ensure that they take all their annual leave for the year by the end of March; and (ii) annual leave could only be carried into the next year in special circumstances if they applied in writing.  In January 2006, NHS Leeds sent another bulletin to staff confirming that annual leave could not be carried into the following year “unless in exceptional circumstances and a written request has been submitted and approved

On 5 January 2009, Ms Larner went on sick leave and did not return to work.  Her employment was terminated on the grounds of capability on 6 April 2010.  NHS Leeds did pay Ms Larner for accrued holidays for the holiday year 2010/2011, but it did not pay her for accrued holidays for the holiday year 2009/2010. Mrs Larner brought a claim for her unpaid holiday.

Background

The Working Time Directive provides that every worker is entitled to paid annual leave of at least four weeks and such entitlement cannot be replaced by a payment in lieu unless the employment relationship is terminated. 

The Working Time Regulations (WTR) provide workers the right to 5.6 weeks annual leave which can only be replaced by a payment in lieu if the worker’s employment is terminated.  The WTR’s also state that a worker’s right to annual leave must be taken in the leave year that it is due if it is to be taken in installments. Therefore, NHS Leeds argued that Ms Larner could not carry forward her holidays as they were not taken in the year they was due.  On that basis, NHS Leeds argued that Ms Larner had lost any right to a payment in lieu in respect of the 2009/2010 holiday year.

What did the Courts Consider?

Both decisions at the Employment Tribunal and the Employment Appeal Tribunal were in favour of Ms Larner.  In particular, the EAT considered previously established law in Pereda v Madrid Movilidad SA.  In Pereda, the ECJ noted that an employee on sick leave, during a previously scheduled holiday, had the right to take that holiday another time.  In Ms Larner’s case, the EAT applied Pereda and considered that as Ms Larner had not had the opportunity to take any holidays during the 2009/10 holiday year (due to her illness) she was entitled to carry over her holidays under the WTR to the following year without having to make a formal request.  On that basis, Ms Larner should have received a payment in lieu of her accrued but untaken holiday entitlement for the year 2009/2010.  NHS Leeds appealed the EAT’s decision and the case was heard by the Court of Appeal.

The Court of Appeal took into consideration the raft of previous European rulings in relation to an employee’s right to annual leave during periods of sickness and concluded that Ms Larner had not lost her entitlement to her 2009/2010 holidays. 

Firstly, by reason of her sickness, it was of the view that she was prevented from taking her paid annual leave.  On that basis, Mr Larner was entitled to take paid annual leave at another time when she was not sick, and if necessary, beyond the year 2009/2010 at a time when she could take advantage of the purpose of the legislation i.e. the right to have time off. 

Secondly, in relation to carrying forward her holiday entitlement, NHS Leeds could only compensate Ms Larner for the loss of holiday entitlement upon the termination of her employment, as provided for under the Directive and the WTR - that was the point in which the right to be paid for annual leave crystallised.  Therefore, the option to pay Ms Larner in 2009/2010 for the holidays lost was not an option available to NHS Leeds.  The only permissible and lawful option was to allow Ms Larner to carry forward her unused paid annual leave into the 2010/2011 leave year.

Thirdly, the Court considered whether Ms Larner actually had an “opportunity” to take her annual leave.  The Court was of the view that NHS Leeds could not successfully argue that Ms Larner had an “opportunity” to take paid annual leave whilst she was off sick.  The Court considered that there was unchallenged evidence that the Ms Larner was unable to take leave in 2009/2010 because of her sickness.  The Court’s decision does however beg the question as to whether NHS Leeds should have considered seeking medical evidence to demonstrate that Ms Larner’s illness did not prevent her from taking annual leave and whether or not that would have had any bearing on the overall decision made by the Court of Appeal?

The Court of Appeal also took into consideration NHS Leed’s main argument that Ms Larner had failed to make a request to carry forward her annual leave, as stipulated by its guidelines and bulletins.  The European rulings in this area had however made it quite clear that there was no legal requirement for an employee to make a formal request to take paid annual leave or carry it forward to another leave period.  For that reason, the Court was not persuaded to divert from its previously established position.

Simply put, the Court of Appeal dismissed NHS Leed’s appeal and ruled in favour of Ms Larner and made the following findings:

- The Claimant was entitled to paid annual leave for the leave year 2009/2010

- She was prevented from taking her paid annual leave because she was sick

- She was entitled to carry her untaken paid annual leave forward to the next leave year in 2010/2011 without making a prior request to do so

Comments

The Court’s decision is helpful guidance in respect of the particular facts in Ms Larner’s case however, there are still a few unanswered questions that follow on from the case. 

Firstly, the Court of Appeal was not asked to decide whether Ms Larner was entitled to seek a payment in lieu of her untaken holiday entitlement that would have accrued during the 2008/2009 (i.e. the period Ms Larner was absent from 5 January 2009 to 31 March 2009).  Given the rationale behind the Courts’ decisions however, it would be relatively safe to conclude that she would have perhaps been entitled to a payment in respect of those holidays in addition to those which accrued in the 2009/2010 and 2010/2011 year. 

The Court did not consider whether the protection to accrued untaken annual leave during a period of sickness should only apply to the four weeks provided under the Directive, or the 5.6 weeks provided under the WTR.  Given the previous European rulings and the provisions of the WTR’s, employee’s are likely to argue that they are entitled to the 5.6 weeks provided for under the WTR, but the Courts may restrict any such entitlement to the four week’s provided for under the Directive.

Furthermore, given the Court of Appeal’s comments in relation to NHS Leed’s inability to challenge Ms Larner’s evidence about being unable to take annual leave, employer’s may also have to consider obtaining medical evidence confirming whether or not an employee is in fact capable or medically able to take annual leave during a period of sickness.

Essentially, the ruling in the Larner case only reaffirms the importance placed on an employee’s right to annual leave.  A purposive approach has definitely been taken which is likely to result in additional costs to employer’s who find themselves dealing with employee’s on long term sickness absence.  From a practical point of view, it is important that any absence is managed from the outset.  Employees should be fully aware that if they are absent from work, especially for significant periods of time, they will not slip off the employer’s radar and will be managed according to an appropriate sickness management policy. 

Employers must also bear in mind that employee’s, who are dismissed on the grounds of capability for long term sickness absence, will be entitled to a payment in respect of accrued but untaken holiday entitlement during their entire period of absence, especially if the employee’s position is that they were unable to take their annual leave due to their sickness.

 

National Minimum Wage – name and shame

The UK Department for Business, Innovation and Skills (BIS) introduced a scheme in January last year that allowed employers to be effectively ‘named and shamed’ if they were found to fall foul of the National Minimum Wage Regulations (NMW Regulations).   The scheme was introduced on the basis that no employer likes bad publicity. Very little has been said or done about the scheme and many employers would have been forgiven for thinking that it was perhaps an empty gesture from the government. 

However, the Minister for Employment Relations Norman Lamb has publicly named Rita Patel recently for failing to pay the national minimum wage to one of her workers following an investigation by HMRC. As HMRC had to enforce the debt through the courts, the Government publicly named Ms Patel.  As a matter of policy, the Government will now publicise any case where arrears of wages have to be enforced through the Courts. HMRC will also issue a press release if an employer unsuccessfully appeals against a notice of underpayment requiring them to pay arrears of wages.

If an employer meets any one of the criteria listed below, they will be publicly named. Essentially, the criteria demonstrate that the employer:knowingly or deliberately failed to comply with their NMW obligations

- previously received advice from HMRC about the steps they need to take to ensure future compliance with NMW which they have not complied with
- failed to take adequate steps to keep or preserve NMW records
- delayed or obstructed a NMW compliance officer in the performance of their duties
- refused or neglected to answer a NMW compliance officer's questions
- refused or neglected to provide information or produce documents to a NMW compliance officer, or
- refused or neglected to pay arrears of the NMW to workers, following HMRC intervention, which has resulted in HMRC taking action against the employer to ensure payment of arrears to workers

Given the criteria, it is likely that employers who blatantly disregard or ignore the NMW Regulations or any advice from HMRC will be named and shamed. HMRC are giving employers the opportunity to remedy any discrepancy but if employers still fail to comply with the NMW Regulations, it is clear that they will be publicly named for all to see. HMRC have however noted that they will not refer cases to BIS unless the total arrears owed to workers are at least £2,000 and the average arrears per worker are at least £500. 

The NMW Regulations not only deal with an employer’s obligation to pay the national minimum wage, but an employer’s obligation to record and keep records of their compliance.  The reality is that many employers will already comply with their obligations under the NMW Regulations, but it is worth employers taking heed of HMRC’s position and ensuring that they currently comply with their obligations under the NMW Regulations.

This information is intended as a general discussion surrounding the topics covered and is for guidance purposes only. It does not constitute legal advice and should not be regarded as a substitute for taking legal advice. DWF is not responsible for any activity undertaken based on this information.

 
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