Court rules rolled-up pay legal in England

The High Court decision is sharply critical of the previous findings of its Scottish equivalent which, in a case involving MPB Structures, found rolled-up pay to be illegal.

It confirms that the current position is that employment tribunals and employment appeal tribunals (EATs) in England and Wales will be bound by its decision that rolled-up pay is permissible, while those in Scotland will equally be bound to find that it is illegal.

It recognises that such contradictory decisions represent "plainly an unsatisfactory state of affairs". It has thus referred the matter to the European Court of Justice for a final ruling.

The court has urged that the European Court should consider the case as soon as possible. But it is thought a hearing might be as far as two years away.

Although the Scottish Court of Session was first to rule on rolled-up pay, the English High Court specifically declared that it was not bound by that decision.

The English case involved brickwork contractor Frank Staddon and brick manufacturer Marshalls Clay Products. UCATT and the GMB unions had appealed against the London EAT decision.

The court confirmed the EAT conclusion that rolled-up pay is legal in contracts that clearly specify a sum or percentage in respect of holiday pay in an hourly or daily rate and where this is understood and accepted by the operative. Such was the case with both Staddon and Marshalls.

It placed some stress on the wording of the Working Time Directive (WTD), which states regulations "shall avoid imposing administrative, financial and legal constraints in a way which would hold back the creation and development of small and medium-sized businesses".

The English law lords were "in profound disagreement" with their Scottish counterparts' conclusion that rolled-up pay "would tend to lead to situations in which workers were discouraged from taking their holidays when they would otherwise have sought to do so".

Lord Justice Laws said: "It seems to me there is no reason why workers generally should not manage rolled-up pay perfectly sensibly."

He also argued that it was particularly significant in the Marshalls case that the existing, complex working arrangements were "the fruit of full and proper negotiations between the employers and the relevant trade union or unions, leading to a collective agreement".