Holiday Pay Cases – What Does It All Mean?

Sun, 11 Jan 2015

Helen Barney discusses the landmark Employment Appeal Tribunal case concerning holiday pay of   Bear Scotland and others v Fulton and Others, Hertel (UK) Ltd v Mr Woods and others and Amec Group Ltd v Mr Law and Others which was handed down on 4th November 2014.

The Employment Appeal Tribunal Decision

The three cases were test cases concerning the calculation of holiday pay and whether overtime and other payments should be included in the calculation.  In a significant ruling Mr Justice Langstaff (President of the EAT) concluded that:

·  Workers should receive their normal wage for holiday pay (following two earlier decisions of the Court of Justice of the European Union).

·  Normal pay for holiday pay included usual payments for non-guaranteed overtime and an allowance paid for travelling time, which exceeded travel costs.

·  The calculation for holiday pay including overtime applies only to the basic 4 weeks annual leave permitted by Europe’s Working Time Directive, and not to the UK’s additional 1.6 weeks leave provided for under UK law.

·  A period of any more than 3 months is generally regarded as too long a time to wait before making a claim to an Employment Tribunal.  As such, any claims for holiday pay will be out of time if a series of underpayments of holiday pay are punctuated by more than three months (subject to the reasonably practicable test).

Leave to appeal to the Court of Appeal has been granted given the potential ramifications of the decision.  The impact and cost to businesses is likely to be substantial, notwithstanding the curb provided by the interpretation of the time-limit.

Implications for Practice

In the interim, what it means is that:

-  At least 4 weeks of holiday pay should be calculated going forward to include usual overtime payments and travel time payments.

-  Workers who have been under paid may bring claims before the Tribunal or County Court for backdated holiday pay.

In the appeal to the Court of Appeal particular attention is likely to be paid to the time-limit issue and whether workers can bring claims for back-dated pay that have been broken by a period of three-months or more.  It would be prudent for employers to spend time with their payroll department assessing their potential liability arising out of the Judgment.  Equally, workers would be well advised to act quickly in making a claim to an Employment Tribunal.

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