Many employers operate flexi-time rules on the amount of hours that can be banked and use of the time accrued.
Flexi-time accrued is not holiday and therefore is not covered by The Working Time Regulations 1998 with regards to payment in lieu on termination.
A recent case has considered whether employees should be paid in lieu of accrued flexi-time when the employer’s flexi-time policy did not deal with this issue.
Vision Events (UK) Ltd v Paterson UKEATS/0015/13/BI
Facts
Mr Paterson was employed by Vision Events (UK) Ltd as a multimedia producer. Under the flexi-time scheme in the staff handbook, if he worked beyond his contracted hours of 45 hours per week, he would be entitled to take that time off at a time to suit the employer. The handbook set out how flexi-time was to be calculated and that flexi-time not used in one month would be carried over to the next month. The handbook was silent on how accrued flexi-time would be treated on termination of employment.
In May 2012, Mr Paterson was made redundant. By this time he had accrued 1042.84 flexi-hours (worth over 12,000!) and he requested to be paid for them. His employer offered him a payment for half their value which he rejected and he pursued an Employment Tribunal claim for unlawful deductions.
The Employment Tribunal hearing the case had to decide whether, in the absence of written rules in the handbook, it should imply a term in to the employment contract that flexi-hours would be paid on termination. They also had to consider the related issue of whether the employer could force Mr Paterson to use his accrued flexi-time during his seven week notice period.
Law
The tribunals can imply a term in to a contract where they believe that it reflects the parties’ intentions at the time of entering in to that contract. The role for the Tribunal therefore is to ascertain the parties’ intentions using various tests including “business efficacy” (is it necessary to make the contract workable?) and “officious bystander” (if an observer to the negotiations had suggested it, the parties would have said that it was obvious that this was their intention).
Employment Appeal Tribunal (EAT)
The original Tribunal upheld the claim, they said that if the employer wanted a “use it or lose it” policy, they should have made it clear. Also, they used the employer’s offer to pay half the sum owed as an admission that Mr Paterson was entitled to something. They also decided that Mr Paterson could not be compelled to use some or all of his flexi-time during his notice period if he did not wish to.
The employer appealed to the EAT.
The majority decision of the EAT was that there was no implied term as it was not required for business efficacy and was not a term which both parties believed should be implied. Their view was that the test applied by the original Tribunal, which looked at the fairness of the situation, was wrong.
The EAT also unanimously agreed that the employer was entitled to insist on an employee using their flexi-time during their notice period and that this did not compromise the employee’s notice entitlement.
Conclusion & Comments
If you operate a flexi-time policy, this should expressly deal with what will happen to accrued but untaken flexi-time on termination of employment and the employer can choose whether this is lost, whether it has to be taken during the notice period or whether the employee will be paid in lieu. The policy should also deal with the extent to which carry over is permitted. In this case, the value of the flexitime built up was very significant and one would think that the accrual of flexi-time should also have been managed better by the employer.
In the absence of clear, written rules, the courts will consider whether to imply terms in to a flexi-time policy. As is shown by the decision made by the ET and then the contrary decision made by the majority of the EAT, the decision here was not an obvious one. Indeed, it may seem surprising to some that an employee would expect to work without pay for flexi-time which becomes valueless on termination.
If you operate a flexi-time scheme or are thinking about introducing one and would like some guidance on making sure your rules are clear and enforceable, please contact one of our team to discuss.
Partner Laura Kearsley is an Employment Law specialist. For more employment law advice or to comment on this article. contact us to speak to a member of our employment law team.