Introduction

The case of Revenue and Customs v. Stringer & Ors ([2009] 4 All ER 1205) addressed a pivotal issue in employment law: the interpretation of "wages" under the Employment Rights Act 1996 ("ERA"). The central question was whether payments related to annual leave, as prescribed by the Working Time Regulations 1998 ("WTR"), qualify as "wages" under the ERA, thereby allowing employees to seek redress for unauthorized deductions under section 13(1) of the ERA.

The appellant, Mr. Keith Ainsworth, contended that HM Revenue and Customs had unlawfully deducted holiday pay from his wages upon termination of employment. The Revenue argued that such deductions did not fall within the definition of "wages" as per section 27 of the ERA. The case escalated through various judicial levels, culminating in a judgment by the United Kingdom House of Lords, which ultimately clarified the scope of "wages" within the ERA.

Summary of the Judgment

The House of Lords reviewed the definitions and provisions related to "wages" under the ERA and the WTR. The crux of the judgment lay in interpreting section 27(1)(a) of the ERA, which broadly defines "wages" to include "any sums payable to the worker in connection with his employment, including… holiday pay…". The Revenue contended that payments under regulation 14 of the WTR, relating to holiday pay upon termination, were not "wages" and thus not subject to the protections under section 13(1).

The House of Lords disagreed, affirming that payments under regulation 14 do fall within the definition of "wages" as they are sums payable in connection with employment. This interpretation was supported by the language of the ERA, existing precedents, and the principle of equivalence under EU law, ensuring that the remedies available under the ERA were not less favorable than those under corresponding EU provisions.

Consequently, the appeals were allowed, the Court of Appeal's order was set aside, and the original order of the Employment Appeal Tribunal was restored. This decision reinforced employees' rights to seek redress for unauthorized deductions related to holiday pay under the ERA.

Analysis

Precedents Cited

The judgment extensively referenced historical and contemporary cases to elucidate the interpretation of "wages":

• Bristow v City Petroleum [1987]: Provided historical context on the Truck Acts and their evolution into the Wages Act 1986.
• Delaney v Staples [1991]: Established that a failure to pay any amount of wages due constitutes an unauthorized deduction under section 13(1).
• New Century Cleaning Co Ltd v Church [2000]: Highlighted limits on what constitutes "wages," particularly regarding unliquidated contractual claims.
• Schultz-Hoff v Deutsche Rentenversicherung Bund; Stringer v HM Revenue and Customs [2009]: ECJ rulings supporting the inclusion of statutory holiday pay within "wages."
• R (Quintavalle) v Secretary of State for Health [2003]: Discussed the interpretation of legislative intent and policy considerations in statutory definitions.
• Royal College of Nursing of the United Kingdom v Department of Health and Social Security [1981]: Authority on interpreting statutory terms in light of historical context and intended purpose.

These precedents collectively informed the court’s understanding of "wages" and the legislative intent behind the ERA’s provisions.

Legal Reasoning

The House of Lords undertook a meticulous statutory interpretation of section 27(1) of the ERA. Key aspects of their reasoning included:

• Linguistic Interpretation: The term "wages" was interpreted in its ordinary and natural meaning. Payments for annual leave under the WTR were deemed "sums payable in connection with employment," fitting within the ERA's definition.
• Legislative Intent: The court considered the broader purpose of the ERA to protect employees from unauthorized deductions, aligning it with the ERA’s heading "Protection of Wages."
• Contextual Analysis: The absence of specific exclusions for WTR-related payments did not imply exclusion. The comprehensive nature of section 27(1) and the inclusive phrasing supported the inclusion of WTR payments within "wages."
• Principle of Equivalence: Under EU law, specifically the principle of equivalence, remedies available for statutory rights must be as favorable as those under comparable domestic laws. This reinforced the inclusion of WTR payments within the ERA framework to ensure non-discriminatory access to remedies.

The judgment underscored that the wording "whether payable under his contract or otherwise" was sufficiently broad to encompass statutory payments introduced post-ERA enactment, such as those under the WTR.

Impact

This landmark decision has far-reaching implications for employment law in the UK:

• Broader Protection: Employees can now more confidently assert their rights against unauthorized deductions related to statutory holiday pay under the ERA.
• Unified Remedy Framework: By encompassing WTR payments within the ERA’s definitions, the judgment harmonizes various statutory remedies, simplifying the process for employees to seek redress.
• Judicial Clarity: The decision provides clear guidance on the scope of "wages," reducing ambiguity and potential litigation over similar disputes.
• Compliance Obligations: Employers must ensure adherence to both the ERA and the WTR, recognizing that statutory holiday pay is protected under the same framework as contractual wages.
• Influence on Future Legislation: The judgment serves as a reference point for future amendments and the drafting of employment-related statutes, emphasizing the importance of comprehensive definitions.

Overall, the judgment fortifies the protections afforded to employees, ensuring that statutory provisions do not inadvertently exclude important aspects of employment remuneration.

Complex Concepts Simplified

Definition of "Wages"

Under section 27(1) of the ERA, "wages" encompass any sums payable to a worker in connection with their employment. This includes various forms of remuneration such as fees, bonuses, commissions, and notably, holiday pay. The crucial aspect is that these payments are directly linked to the worker’s employment, whether through their contract or statutory provisions.

Working Time Regulations 1998 (WTR)

The WTR are statutory instruments that implement the European Working Time Directive, focusing on aspects like maximum working hours, rest periods, and annual leave entitlements to promote worker health and safety. Regulations 14 and 16 specifically deal with compensation related to untaken annual leave upon termination of employment.

Section 13(1) of the ERA

This provision prohibits employers from making deductions from wages unless authorized by statute, contract, or with the worker’s written consent. Unauthorized deductions are actionable under this section.

Section 27 of the ERA

This section provides the definition of "wages," which is pivotal in determining what payments are protected under the ERA against unauthorized deductions. The inclusion of various specific payments under subsection (1)(a) reinforces the broad scope intended by the legislation.

Principle of Equivalence

Originating from EU law, this principle mandates that national remedies for breaches of European rights must be as effective as those available under comparable domestic laws. In this case, it ensures that employees have access to equally favorable remedies for statutory holiday pay violations as they would for contractual wage breaches.

Conclusion

The House of Lords' judgment in Revenue and Customs v. Stringer & Ors serves as a definitive interpretation of "wages" within the Employment Rights Act 1996. By inclusive reading, the court confirmed that statutory payments related to annual leave under the WTR are "wages," thereby granting employees robust protections against unauthorized deductions. This decision not only clarifies existing legal ambiguities but also strengthens the enforcement of statutory rights, ensuring that employees can effectively seek redress through employment tribunals without being constrained by narrower definitions or restrictive time limits.

Moving forward, employers must recognize the broad definition of "wages" to include statutory entitlements like holiday pay, ensuring compliance to avoid legal repercussions. For employees, this judgment reinforces the accessibility of remedies under the ERA, fostering a fairer and more transparent employment landscape.