LLP members and the Working Time Regulations: the statutory right to annual leave and payment in lieu
Following the decision in Clyde & Co LLP -v- Bates van Winkelhof (see our previous alerts on the topic here), we continue to look at the implications of the Supreme Court’s decision for LLP members and their firms. This week, we focus on the right to annual leave which LLP members now have under the Working Time Regulations (the “WTR”) 1998.
A right to holiday pay?
LLP members as ‘workers’ now have a right to a minimum of 5.6 weeks’ paid annual leave, which can include bank holidays (equivalent to 28 days for an LLP member working full-time, pro rated for those working part-time). Consequently, an LLP member leaving their firm will be entitled to receive payment in lieu of any untaken statutory holiday entitlement in respect of their last year as a member of the firm (pro-rated to the proportion of the year that they worked). For many professional firms this liability could be costly.
Case law relating to the calculation of holiday pay is complicated and in a state of flux (with only this week, an important ruling being made on what should be included in any such calculation (see Bear Scotland v Fulton)). In the case of an LLP member, the calculation of any holiday pay owing would ultimately depend on how the LLP structures its remuneration system.
If a firm does not pay the LLP member in respect of unused leave on their departure, the LLP member can seek the amount due by presenting a claim under the WTR 1998 to an Employment Tribunal. Any such claim must usually be brought within 3 months beginning with the date on which the payment should have been made. Alternatively, a claim could be brought under the Employment Rights Act 1996 as a deduction from wages claim This claim must also usually be brought within 3 months of the date when the payment in lieu of untaken holiday should have been paid. Both types of claims would be subject to ACAS mandatory early conciliation.
Further impact of the WTR 1998 on LLP members?
The Regulations also give individuals the right to :
- A cap of 48 hours a week on their average working time (although individuals can choose to opt-out of this, as they can in relation to certain other rights granted by the WTR 1998);
- Rest periods (i.e. 11 hours’ rest per day; 24 hours’ uninterrupted rest per week and a rest break of 20 minutes when working more than 6 hours per day);
- Limits on night working and assessments for those night workers (broadly speaking a night worker is an individual who works at least 3 hours between 11 pm and 6 am on most working days).
However, Regulation 20 provides an exemption to the above rights for individuals whose “working time is not measured or predetermined or can be determined by the worker himself…” and in particular “managing executives or other persons with autonomous decision-taking powers.” Whether LLP members falls within this exemption is fact sensitive but, on balance, we consider that the exemption is likely to apply to them. However, this specific provision of the WTR 1998 is notoriously vague and it would ultimately take case law to clarify its scope.
Along with whistleblower and part time worker status protection, the new right to paid annual leave (and to pay in lieu of untaken holiday on retirement from the firm) is another quasi-employment law protection for LLP members of which firms should be aware. Firms should update their processes and procedures to ensure that, where not done so already, detailed records are kept of LLP members’ annual leave and that members are paid in lieu of untaken holiday when leaving a firm to avoid future claims on this issue.