Employer Not Obliged to Pay for Untaken Flexi-hours on Termination

A tribunal should not have implied a term into a dismissed employee’s employment contract that he was entitled to be paid for unused flexi-hours which had accrued at termination. 

In Vision Events (UK) Ltd v Paterson, P participated in a flexi-hours scheme under which if he worked more than his contracted 45 hours per week, he became entitled to time off in lieu. P was made redundant and at dismissal had accrued 1042.84 hours of flexi-time and sought payment for them. His employer offered to pay half but P rejected the offer and brought an unlawful deduction from wages claim. 

There was nothing in the employment contract or employee handbook stating how untaken flexi-hours would be dealt with on termination. However, the tribunal did not think that P should forfeit the flexi-hours without being paid for them, or that he could be required to take them during his seven week notice period. It therefore implied a term into his contract that payment would be made for the accrued flexi-hours and ordered the employer to pay £12,514.

The employer appealed and the EAT upheld the appeal. An implied term was not necessary for business efficacy i.e. to make the contract work, and it was clearly not a term both parties believed should be implied as they would not have said that such a term was agreed between them. 

The EAT also held that the employer had been entitled to require P to use up the flexi-hours during his notice period. The employer was contractually entitled to direct the time when those hours should be used, and this did not conflict with its obligation to pay P in full for his notice period in accordance with its statutory obligations.

Employers should review their flexi-time policies and make sure that their policy makes it clear what happens to unused flexi-time on termination. Will it be paid in lieu or will employees be required to use up the hours during the notice period? It would also be sensible to put a limit on the number of flexi-time hours that can be accrued. The employee in this case had accrued in excess of 1000 hours, meaning that even if used the flexi-hours during the whole of his seven week notice period there would still have been over 700 unused hours. Although the EAT found in the employer’s favour in the end, the cost of the litigation could have been avoided if the policy had dealt with the position expressly.