Banded Hour Contracts – What is the Reference Period?

Introduction

A recent case before the Labour Court (the Court) on appeal from the Workplace Relations Commission (WRC) examines the factors that will be considered when deciding the reference period for the purposes of banded hour contracts. 

Background

This was an appeal by the respondent at first instance, Aer Lingus (the Respondent), against a decision of an Adjudication Officer in a complaint by Cliona O’Leary (the Complainant) made under the Organisation of Working Time Act 1997 (the Act) concerning her entitlement to be placed on a banded hours contract under Section 18A of the Act. The Adjudication Officer decided that the complaint was well-founded. 

Banded Hours and the Organisation of Working Time Act

The Act at Section 18A sets out the bands of weekly working hours upon which an employee may be placed as follows:

Band From To

A 3 Hours 6 Hours

B 6 Hours 11 Hours

C 11 Hours 16 Hours

D 16 Hours 21 Hours

E 21 Hours 26 Hours

F 26 Hours 31 Hours

G 31 Hours 36 Hours

H 36 Hours and over

The Respondent, in response to the request to place the Complainant on a band of weekly hours as provided for in the Act, placed her on Band F. The Complainant contended that the Respondent miscalculated her entitlement to a band of weekly working hours by failing to calculate time spent on annual leave during the reference period as working time within the meaning of the Act and consequently complains that the Respondent failed to place her in a band of weekly working hours as required by the Act.

The Respondent contended that time spent on annual leave cannot be treated as hours worked for the purposes of determining the average number of hours worked per week by the Complainant during the reference period.

Calculation of Banded Hours and Annual Leave

The Act at section 19 sets out the statutory entitlement to annual leave and at subsection 5 provides as follows:

• 5) An employee shall, for the purposes of subsection (1), be regarded as having worked on a day of annual leave the hours he or she would have worked on that day had it not been a day of annual leave

The Act makes supplemental provision in relation to Public Holidays and states at Section 22 as follows:

• (2) For the purposes of section 21, time off granted to an employee under that section or section 19 shall be regarded as time worked by the employee.

The Act at Section18A sets out protections to be afforded to workers which are unrelated to protections derived from the Working Time Directive 2003/88 of the European Union and which are transposed into Irish legislation by various provisions of the Act. The Court must therefore look to the Act itself to establish the meaning of the disputed provision of that Section rather than to Directive 2003/88 of the European Union but without undermining the protections guaranteed therein.

Section 18A sets out that an employee is entitled to request an employer to place her in a band of weekly working hours which reflects the average hours she works per week. This entitlement is given to an employee where she considers that her contract of employment or statement of terms of employment does not reflect the number of hours she works per week. Where such a request is made, an employer is required to determine the appropriate band to place an employee by calculating the average hours worked by the employee in the course of a 12-month ‘reference’ period. The plain purpose of the provision is to ensure the number of hours specified in the contract of employment reflects an employee’s actual working week.

If the calculation mechanism contended for by the Respondent is to be accepted, then, as a matter of mathematical certainty, this objective will automatically be defeated. This is so because the mathematical means to average hours worked across a 12-month period contended for by the employer is to total all hours worked in the period using a divisor 52. Thus, in a year where the employee has spent one week or more on annual leave as distinct from being at work, a divisor of 52 will lower the average. This methodology would guarantee a resulting average which does not reflect the average number of ‘hours worked’ per week by the Complainant in any week where she engages in ‘working time’ as that term is to be interpreted according to Section 20 of the Act.

Section 18A of the Act does not provide a definition of the term ‘hours worked’. Section 2 of the Act does set out that the term ‘work’ should be construed in accordance with the interpretation of the term ‘working time’ set out in that section.

The Court was satisfied that the treatment of annual leave required by Section 19 relates to the treatment of such leave for the purposes of Subsection 1 of that section only. The Court also notes that section 2 of the Act requires that ‘In the Act’, the term ‘annual leave’ shall be construed in accordance with Section 19. The term ‘annual leave’ is not used in Section 18A of the Act.

The Court was therefore satisfied that no provision of the Act provides a means to interpret Section 18A(4) such that the meaning of the requirement resting on the employer to determine ‘the average number of hours worked by that employee per week during the reference period’ can be said to be clearly and unambiguously set out. In particular, the Act does not make clear how time spent on annual leave is to be treated in the calculation of the average. The Court cannot simply import the treatment required of annual leave in Section 19 of the Act into Section 18A and neither can it apply the meaning of the term ‘annual leave’ set out in Section 2 to the provisions of Section 18A which does not use that term at all. Similarly, references in the Act to the treatment of annual leave do not resolve the matter.

In circumstances where, in the view of the Court, the meaning of Section 18A(4) of the Act appears to be ambiguous and where a literal interpretation of the term ‘the average number of hours worked by that employee per week during the reference period’ as used in that subsection would, in the view of the Court as has been set out above, fail to reflect the intention of the Oireachtas, it is necessary to interpret the legislation in the manner provided for at section 5 of the Interpretation Act, 2005 (the Act of 2005) which provides as follows:

5. (1) In construing a provision of any Act (other than a provision that relates to the imposition of a penal or other sanction)—

(a) that is obscure or ambiguous, or

(b) that on a literal interpretation would be absurd or would fail to reflect the plain intention of—

(i) in the case of an Act to which paragraph (a) of the definition of “Act” in section 2 (1) relates, the Oireachtas, or

(ii) in the case of an Act to which paragraph (b) of that definition relates, the parliament concerned,

the provision shall be given a construction that reflects the plain intention of the Oireachtas or parliament concerned, as the case may be, where that intention can be ascertained from the Act as a whole.

The Court, therefore, concluded that the only reasonable means to ensure that the plain intention of the Oireachtas can be achieved is by interpreting Section 18A(4) to mean that the divisor to be used to calculate the average number of hours worked by an employee per week during the reference period should be determined by excluding the number of weeks spent on annual leave in the period. Thus, in a reference period of 52 weeks where an employee has spent, for example, four weeks on annual leave, the divisor for the purposes of section 18A(4) of the Act should be 52 minus 4 which is 48. In this manner, the average number of hours worked by that employee per week during the reference period can be determined by calculating the average hours worked per week in those weeks where the employee is engaged in work as defined in Section 2 of the Act and allowing for the fact that time spent on annual leave during the reference period is not treated as working time for the purposes of the Act at Section 18A.

Determination

The Court determined that the within complaint is well-founded and required the Respondent to comply with Section 18A and place the Complainant on the appropriate band of hours.