Can employees who agree to work reduced hours be entitled to guaranteed payments for days they do not work? Yes, says the Court of Appeal in Abercrombie and others v Aga Rangemaster Ltd.
Under section 28(1) of the Employment Rights Act 1996 (ERA 1996), during periods of lay-off or short-time working an employee is entitled to a statutory guarantee payment in the following circumstances:
Where throughout a day during any part of which an employee would normally be required to work in accordance with his contract of employment the employee is not provided with work by his employer by reason of:
a diminution in the requirements of the employer's business for work of the kind which the employee is employed to do, or
any other occurrence affecting the normal working of the employer's business in relation to work of the kind which the employee is employed to do,
the employee is entitled to be paid by his employer an amount in respect of that day.
The claimants were approximately 330 hourly-paid employees at Aga Rangemaster Ltd's (Aga) factory in Leamington Spa. They had a contractual working week of 39 hours, worked Monday-Friday. As a result of poor trading conditions in late 2008 Aga reached an agreement with the recognised trade union, the GMB for a reduction in working hours to 34 hours per week worked Monday-Thursday (the Agreement), which initially ran from 1 January to 26 June 2009. The Agreement was subsequently extended to 31 December 2009. The Agreement contained a provision allowing the Respondent to cancel it, so that there was a return to full-time working, on one week’s notice.
In March 2009, the union sought confirmation that Aga would be paying guarantee payments for the period of the Agreement. Aga declined on the basis that the agreed variation to employees' contracts meant that they did not normally work on Fridays and so had no entitlement to guarantee payments. The employees then issued tribunal proceedings.
By September 2009 it became clear that work was picking up and, following discussions with the Union, Aga made it known to employees that they could return to the pre-Agreement working hours with effect from the beginning of October. Some did so, but others preferred to continue working the shorter hours until the Agreement expired at the end of the year. The 39-hour week resumed for all employees from 1 January 2010.
The Tribunal rejected the employees' claims.. It held that the effect of the temporary variation of the employees' contracts was that, during the period of the Agreement, the employees were not normally required to work on Fridays.
The employees appealed to the EAT. Their appeal was rejected as the EAT held that the fact that an agreed variation of contract terms was temporary did not prevent there being a change to employees' normal working hours for the purpose of considering entitlement to guarantee payments under section 28(1) of ERA 1996.
The employee's appealed to the Court of Appeal.
The Court of Appeal allowed the appeal.
The Court found that the key question in respect of section 28(1) was whether the employee would normally be required to work on the day in question in accordance with his contract. The court considered it irrelevant whether an "abnormal" state of affairs was covered, by an agreement which expressly varied the contract: what mattered was that it was abnormal.
The Court of Appeal rejected Aga's contention that the Agreement created "a new normal". The court noted that the Agreement was always intended as a temporary arrangement, initially intended to last a maximum of six months though subsequently extended to twelve, and it was terminable on a week’s notice. The court considered it clear that five-day working remained the norm even during the period of the Agreement. The Agreement provided for a temporary departure from that norm rather than a replacement of it.
Employers who operate short-time working arrangements should be aware that in determining whether employees are entitled to guaranteed payments under s28(1) ERA a Tribunal will consider what employees are normally required to do. Where a variation to a working pattern is expressed to be temporary, this will be a significant indicator that there has been no change to what is normal.
This publication is intended for general guidance and represents our understanding of the relevant law and practice as at October 2013. Specific advice should be sought for specific cases; we cannot be held responsible for any action (or decision not to take action) made in reliance upon the content of this publication.
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