The Trust pay Ms Brazel on a monthly basis according to the number of hours worked in the previous month, but she is paid her holiday pay at the end of every term. When calculating Ms Brazel’s holiday pay, the Trust followed Acas guidance on casual workers by using the rate of 12.07% per hour worked. Ms Brazel argued that was not the correct calculation under the Working Time Regulations and produced a lower figure. She disagreed that her holiday pay should be pro-rated simply because she did not work a full year.

Ms Brazel’s claim for unlawful deduction of wages failed in the Employment Tribunal, but her appeal to the Employment Appeal Tribunal was successful. The Trust appealed to the Court of Appeal.

The question for the Court of Appeal to decide was, by which method should Ms Brazel’s payments for annual leave be calculated?

The Court of Appeal coined a new term to describe employees in Ms Brazel’s situation – “part-year workers”. The Court felt that it was not apt to call such employees “term-time workers” as that denoted employees who are only employed during the term, while Ms Brazel was employed all the year round, albeit she only worked during term time.

Importantly, the Court decided that the position of a part-year worker such as Ms Brazel was not the same as a part-time worker, so there was no need to apply pro-rating as one would with the latter type of worker. This meant Ms Brazel’s holiday pay should be calculated by first determining a week’s pay – her average weekly remuneration during the previous 12 weeks – and then multiplying that figure by 5.6. This would make Ms Brazel’s holiday pay 17.5% of her actual earnings as opposed to the 12.07% rate used by the Trust.

The result is that a part-year worker will get higher holiday pay than a full-year worker, but the Court did not consider this to be “unprincipled or obviously unfair”:

“the actual days from which they will be relieved, and the quantum of their holiday pay, will reflect their actual working pattern.” Court of Appeal

This case will have implications for employers of part-year workers, such as teaching institutions, as these workers may complain about the size of their holiday pay or bring claims for unlawful deductions. There is some comfort for employers that such claims have a retrospective limit of two years.

Any employers who currently use the 12.07% rate to calculate holiday pay for permanent part-year workers would do well to review their employment contracts and assess their potential litigation exposure. The benefit of moving to calculate holiday pay on the basis [...]]]> http://lawandlabour.com/holiday-pay-for-part-year-workers-need-not-be-pro-rated/feed/ 0 http://lawandlabour.com/how-might-brexit-affect-employment-law/ http://lawandlabour.com/how-might-brexit-affect-employment-law/#comments Sun, 15 May 2016 10:26:02 +0000 http://lawandlabour.com/?p=2321 On 23 June 2016, a referendum will be held in the United Kingdom to decide whether this territory should leave the European Union (‘Brexit’). If Brexit were to take place, this development could have a significant impact on employment law.

Much of the legislation relating to employment rights has its foundation in European law. In addition, UK courts have to abide by the decisions of the European Court of Justice when interpreting any employment law that has its basis in EU law.

In the table below, we summarise which areas of law are likely to change.

Despite the concerns noted above, any changes are unlikely to take place immediately following Brexit. The rules governing EU membership mean it will take two years for the UK to leave the EU. The Government would therefore be more likely to retain current legislation for a period of time before making changes to individual legislation on a piecemeal basis as and when necessary.

“European Union flag” by Flikr user Yanni Koutsomitis used under Creative Commons Attribution 2.0 license

The case has already been all the way to the European courts where it was decided that a worker should have commission taken into account when calculating their holiday pay.

The case was then returned to the Employment Tribunal to look at whether the domestic legislation governing holiday pay, the Working Time Regulations 1998, could be interpreted so as to make it consistent with European law. The answer is no.

The Employment Tribunal has decided that additional wording must be read into the Working Time Regulations – in the form of a new regulation 16(3)(e) – to allow commission to be taken into account when calculating a week’s pay.

The matter is not over, however. Outstanding issues for the Employment Tribunal to determine include the correct reference period for calculating holiday pay and whether Mr Lock’s commission scheme adequately compensated him for holiday pay.

CASE Lock v British Gas Trading Limited, Employment Tribunal, 23 March 2015

For years, employees have argued that it was unfair that their holiday pay should only reflect their basic salary when, in reality, their normal income included other payments, such as commission and overtime.

It was already a well-established principle that workers should receive “normal pay” in respect of their annual leave. The question that continues to be pondered is, what does normal pay consist of?

The EAT has now given a decision on whether overtime should be included in holiday pay, in three cases which were heard together. The decision related to what the EAT termed “non-guaranteed overtime”, that is, where the employee is contractually obliged to work overtime if asked to do so by their employer. The EAT’s ruling means that in such situations overtime must be taken into account when calculating pay for annual leave.

One complication is that the rules only apply to 4 weeks’ holiday, and not the 5.6 weeks’ holiday workers are entitled to under English law. This is to reflect European law from which the rule stems.  Under EU law workers are only entitled to 4 weeks’ paid holiday, and the rule only pertains to this entitlement.

In practical terms, employers can expect to see their wage bills rise. Some unions have warned of claims stretching back to 1998 when the law governing holiday pay was first introduced into England and Wales. However, employers have some protection against retrospective claims for unlawful deduction of wages for their failure to pay correct holiday pay. The EAT has decided that in a claim for a series of deductions, the series will be broken if there is a gap of three or months between deductions.

The Government has immediately warned it is setting up a taskforce to assess the impact of the decision on businesses.  It is likely that the decision will be appealed to the Court of Appeal, so watch this space for future developments.

CASE (1) Bear Scotland Ltd v Fulton; (2) Hertel v Wood; (3) AMEC Group v Law, Employment Appeal Tribunal, 4 November 2014