Member Article

Need to know - updates to holiday pay

November has been an important month in the world of employment law, and in particular, the issue of holiday pay, which has been highlighted in the conjoined cases of Bear Scotland Limited v Fulton, Hertel (UK) Limited v Wood & Others and Amec Group v Law & Others in the Employment Appeal Tribunal.

The judgment

The EAT has ruled that ‘non-guaranteed’ overtime should be taken into account when calculating a worker’s entitlement to holiday pay, because workers are entitled to be paid their ‘normal remuneration’ whilst taking holiday.

The implications for employers

Employers are now required to pay workers their ‘normal remuneration’, (taking into account any overtime they have worked) for the 4 weeks of leave under the EU Working Time Directive 2003 (WTD), but not for the 1.6 weeks of leave under the Working Time Regulations (1998) (WTR). This raises the daunting administrative nightmare of employers needing to operate a two-tiered system for administering and paying one employee two different rates of holiday pay entitlement.

Backdated claims for unpaid wages

The biggest fear for employers was that the EAT’s decision would open the floodgates for substantial unlawful deduction from wages claims. The concern was that Employees would in theory be able to claim underpaid holiday pay back to 1998 (when the WTR came into force) on the basis that each underpayment constituted one of a series of deductions. However, it appears that the EAT has thrown employers a lifeline.

The EAT did not think that it was right that if there were large gaps between holidays taken by a worker, their right to bring a claim based on a series of underpayments should still be preserved. The usual time limit to present a claim to the Employment Tribunal is 3 months. The EAT concluded that Parliament must have intended this time limit should apply to any underpayment claim. Therefore, if an employee brings a claim for a series of deductions from wages (within 3 months after the last underpayment) the Tribunal will have no jurisdiction to order payment in respect of any underpayment which is more than 3 months earlier than its successor in the series. A gap of 3 months or more breaks the chain.

What next?

Leave to appeal has been granted, so expect further litigation on this subject before we get a definitive answer. For now, employers need to get their houses in order to ensure that, going forward, they are paying the correct amounts. This makes them compliant with the law, and will also have the effect of limiting the claims for underpaid holiday pay. Employees, on the other hand, have a very limited window in which to take action if they believe they have been underpaid. With the ability to recover underpaid holiday pay limited, employees will have to move quickly if they are to ensure that their claims are lodged before the expiry of the 3 months limitation period which applies to all Tribunal claims.

For more information on Employment Law, and holiday pay, contact Tom Moyes at Blacks Solicitors on 0113 207 0000.

This was posted in Bdaily's Members' News section by Blacks Solicitors .