Article

Case Update: National Minimum Wage and Term-Time Only Workers

23rd March 2023

The complexities of term-time only working arrangements have, once again, been emphasised in case law. This time by the Employment Appeal Tribunal (EAT) in the recent judgment of Lloyd v Elmhurst School.

Background

This case concerned a term-time only learning support assistant and her entitlement to the national minimum wage (NMW). In particular, the EAT considered whether the calculation of pay for NMW purposes should include hours falling outside of a school term. In reaching its decision, the EAT addressed the question of what should count as a salaried workers’ ‘basic hours’ for the purpose of a claim under the National Minimum Wage Regulations (NMW Regulations).

Facts

The employee, Ms. Lloyd, worked three days a week at Elmhurst School during term-time and was paid in twelve equal monthly instalments. Her contract did not expressly state her hours of work, rate of pay, or annual salary. Instead, it referenced an obligation “to attend to duties during term time as the CEO and/or Head Teacher may reasonably direct”. Crucially, it also stated that she was “entitled to the usual school holidays as holidays with pay.”

Ms. Lloyd brought a claim in the Employment Tribunal for an unlawful deduction from wages and, in doing so, specifically alleged that in paying her an annual salary of £8,568, the School had failed to meet its obligations to ensure that she had been paid the NMW for her hours of work.

It was accepted that Ms. Lloyd was employed, for the purpose of the NMW Regulations, in ‘salaried hours work’ in that she was paid an annual salary, in equal instalments, for a basic number of hours. The issue in question was what made up the basic number of hours and, in particular, whether it included hours during the school holidays.

Ms. Lloyd claimed that the School had mistakenly calculated her salary based on 40 weeks of the year, which included the 36 weeks she worked during term time and 4 weeks of statutory paid holiday – the School accepted that the payment of 4 weeks’ holiday was an error and that Ms. Lloyd was, in fact, entitled to 5.6 weeks’ leave.  Instead, she argued that, as a salaried worker, for NMW purposes, her basic hours should be calculated over a period of 52 weeks (including all the school holidays).

The School argued it was never its intention to pay Ms. Lloyd for the entire school holidays and both parties were aware that Ms. Lloyd worked term-time only and, as such, with the exception of her statutory holiday entitlement, the period during the school holidays did not count as working hours.

Employment Tribunal’s decision 

The Employment Tribunal dismissed Ms. Lloyd’s claim finding that Ms. Lloyd only worked during school terms and, with the exception of her statutory holiday entitlement, the intention of the parties was that the period during the school holidays did not count as working activity. As a result, her pay had not fallen below the rate required under the NMW Regulations.

Ms. Lloyd appealed the decision to the EAT.

EAT’s decision

The EAT upheld her appeal. On a strict reading of the NMW Regulations, the EAT held that, as a salaried worker, Ms. Lloyd’s ‘basic hours’ had to be calculated by reference to the terms within her employment contract and could include hours that were not working hours (such as contractual holiday periods).

The EAT emphasised that the Employment Tribunal had erred by not appropriately identifying Ms. Lloyd’s basic hours from the terms of her employment contract, which specified that the school holiday periods were “holidays with pay”.

The EAT ultimately clarified that focussing on hours actually worked for the purpose of the NMW Regulations was the wrong approach to take and, for a salaried worker, periods of absence for which contractual salary is due, even if the employer would not otherwise be expecting the employee to work during that period, should be included within a worker’s basic hours. As such, for claims of this type, the EAT held that the focus should not be on the intentions of the parties or working practices, but what the contract expressly states.

The case has now been remitted to another Tribunal to determine Ms. Lloyd’s actual basic hours to decide whether she had been paid in accordance with the NMW.

Impact on schools

The decision in this case highlights the importance of ensuring that an employee’s contract of employment contains clear contractual terms that reflect the intentions of the parties with regard to ‘basic hours’ of work. For NMW purposes, for a salaried worker, ‘basic hours’ are determined in accordance with contractual provisions and, if a contract fails to accurately reflect the intentions of the parties and/or working practices, those factors are, ultimately, irrelevant.

For term-time only workers, to avoid a situation where a worker’s basic hours should be calculated over a period of 52 weeks, running the risk that their pay will fall below the NMW entitlements, schools should ensure that contracts of employment expressly distinguish between school holiday periods and contractual entitlements to paid holiday.

The decision also serves as a useful reminder of the importance of avoiding giving term-time only workers a contractual entitlement to all school holidays as holiday which can result in term-time only staff accruing holiday during periods of family related leave or sickness absence at a rate equivalent to the school holiday periods.

For any specific queries in relation to this case, or any other employment matter, please contact Rhys Evans.