Flex-time schemes, unused hours and termination

Hourglass iStock 000000558679XSmall 146x219Claire Deane analyses a key Employment Appeal Tribunal ruling for local authorities and other public bodies that operate flexi-time schemes.

In the case of Vision Events (UK) Ltd v Paterson UKEAT/0015/13 the EAT considered what should happen to unused hours on termination of employment where the employer operates a flexi-time scheme. This case is useful as many local government organisations offer flexible working hours schemes.

Facts

Mr Paterson was employed by Vision Events (UK) Ltd. He was entitled to participate in a flexi-hours scheme which allowed him to take time off at a time that suited his employer if he worked in excess of his contractual 45 hours per week. He was not entitled to overtime payments.

The flexi-hours policy was in the employee handbook. Vision insisted that flexi-time had to be taken at a time to suit the business. There was an occasion when Mr Paterson had requested that he take his accrued entitlement so that he would be able to take an extended break to New Zealand in 2011. However the request was refused. The policy did not deal with the employer’s stance on accrued flexi leave on termination of employment. The contract of employment was also silent on this point.

In May 2012 Mr Paterson was made redundant by Vision and at that time he had accrued 1042.84 hours of flexi-time. This amounted to 23 weeks of leave based on Mr Paterson’s contractual hours. He sought payment in lieu of this accrued time from his employer. Vision offered to pay the equivalent of 50% of the accrued hours however Mr Paterson refused this offer and brought an Employment Tribunal claim for unlawful deduction from wages and a claim for unfair dismissal in respect of his redundancy. Vision subsequently withdrew their offer to pay 50% of the accrued hours.

The Employment Tribunal (ET) found in favour of Mr Paterson in respect of the unlawful deduction from wages claim, holding that he should not have to work hours for which he would not be paid and ordered Vision to pay Mr Paterson £12,514.

Specifically, the ET judgement stated that the Tribunal was not persuaded that Mr Paterson’s failure to self-manage those flexi hours should result in the situation where Vision could successfully argue that this was a case of ‘use it or lose it’. The Tribunal found that if that had been Vision’s intention then it should have been ‘spelt out to the employees’. The ET implied a term into the contract of employment that permitted Mr Paterson to be paid for accrued hours on termination. Further, the Tribunal did not understand the basis on which Vision would make an offer of payment if it did not consider that Mr Paterson should be paid for hours worked.

The ET found in favour of Vision with regard to the claim of unfair dismissal.

As a result of these findings Vision appealed the decision regarding the unlawful deduction from wages claim and Mr Paterson cross appealed the decision on unfair dismissal.

For the purposes of this summary we will focus on the Employment Appeal Tribunal’s (EAT) decision in respect of the unlawful deduction from wages claim.

Vision’s appeal was allowed by a majority. The EAT held that there was no express term that money would be paid for accrued flexi-hours on termination of employment. The EAT found there was no need to imply such a term and held that the ET had erred in law by doing so.

The majority also disagreed with the ET’s view that Vision’s offer to pay 50% of the accrued hours suggested that such a term should be implied into the contract of employment. The EAT held that it is not necessary to imply such a term for business efficacy reasons and it is clearly not a term which both parties believed should be implied. The EAT held that the company was not required to pay Mr Paterson any money in respect of the accrued but unused hours.

What this means for local government employers who operate a flexi-time scheme

There are useful lessons to be learned from this case. The ET and the EAT acknowledged that the poor drafting of the flexi-hours scheme was the main problem in this case. The employer’s intention on termination could have been addressed in the policy.

If you operate a flexi-time policy you should ensure that it addresses the issue of payment on termination of employment. You should also ensure that employees and managers review accrued hours and only allow a certain amount of hours to be carried over at any one time to avoid a similar situation arising whereby 1043 hours were accrued by Mr Paterson.

This is a positive judgement for employers in that it shows that a goodwill offer of payment by an employer should not be seen as a concession of wrongdoing. The case also highlights that Employment Tribunals will be bound by what parties have expressly agreed and additional terms should only be implied where it is necessary to make the contract work.

Claire Deane is an employment solicitor at Sefton Metropolitan Borough Council. She can be contacted This email address is being protected from spambots. You need JavaScript enabled to view it..