The UK Supreme Court has handed down an important decision in Harpur Trust v Brazel on whether an employee’s right to paid holiday should be pro-rated or accumulated according to the working pattern of the employee.
The decision upheld that of the Court of Appeal which held that employees who work for part of the year should not have their holiday pro-rated. The case will have implications on organisations for those who employ people on a part-year i.e. workers on permanent contracts who work only part of each year, or zero hours basis.
The need for paid holiday is a fundamental part of an employment contract; Article 2(4) of the European Social Charter highlights it as a condition for fair work. The importance of holiday is not in doubt, but its applications can often lead to tricky issues, particularly for organisations which do not always have typical employment relationships or where members of staff are not engaged to work throughout the year.
Facts of the Case
The Respondent in this appeal, Ms Brazel was employed permanently as a music teacher at the Bedford Girls’ School but worked term-times only. This meant that she received payment for the hours she taught which often varied each month.
At the end of each school term, Ms Brazel took her annual leave. However, the Harpur Trust changed the way it calculated Ms Brazel’s holiday pay in 2011. Following the ACAS guidance at the time, the hours Ms Brazel worked were multiplied by 12.07%. This figure was then multiplied by her hourly pay rate. This was used as Ms Brazel’s holiday pay figure.
As a result, Ms Brazel argued that this meant she received less holiday pay than before. However, the Harpur Trust deflected this claim citing that this way of calculating the holiday pay reflected Ms Brazel’s accrued holiday in proportion to the hours she had worked.
Ms Brazel’s claim was accepted by The Court of Appeal which stated that as a “part year worker”, UK legislation does not allow for Ms Brazel’s paid holiday to be pro-rated. The Court rejected the Trust’s claim that it would be unfair.
The Trust Appeal to the Supreme Court
The Harpur Trust appealed this decision to the Supreme Court citing that European Union law from which the Working Time Regulations derive required holiday entitlements to be calculated on a pro-rated basis, that it would be unconscionable that anyone working for a few days each year should be entitled to a larger percentage of holiday than a full time worker proportionate to the time which they actually work. The Trust also argued that there were better and more logical readings of the relevant statutes than were cited by the Court of Appeal.
However, the Supreme Court rejected all of the Trust’s grounds of appeal in a unanimous decision. The Court confirmed part year workers’ entitlement to 5.6 weeks’ holiday without any pro-rating being necessary and that for workers who have no usual working hours, pay should be calculated by referring to the hours actually worked over a 52-week period.
In short, the Supreme Court found that the alternative readings suggested by the Trust were inconsistent with statute and that EU law did not require holiday entitlement to be pro-rated in every situation even where a favourable position for an employee may occur. The Supreme Court also found that the odd occurrence of atypical workers being slightly favoured was not ‘absurd’ as argued by the Trust as it did not justify a full reinterpretation of statute. In addition, the Court found that the Trust could not rely on the ACAS guidance at the time because it does not “affect the proper construction of the statutory wording”.
What can employers do to ensure they are following the law now?
Without a change in the relevant legislation, the law in this area is now considered settled as there is no further course of appeal on this matter. This means that for part- year workers, holiday entitlement remains at 5.6 weeks each year and their holiday pay must be calculated referring to average earnings over 52 weeks rather than by reference to the hours worked.
Employers should also conduct an audit of any employees who are on a permanent contract for part of the year who may be affected by this recent decision. Calculating the difference between these employee’s current holiday pay and what they should be receiving under the recent case will show any underpayment.
This will reveal any possible unlawful deduction of wages for which claims can be brought for a maximum of two years’ worth of back pay. It is worth noting that a claim needs to be issued within three months from the last unlawful deduction. Conducting such an audit can assist employers in assessing their financial liability.
However, it is also important to note that if an employee has been miscategorised as an independent contractor or consultant and therefore does not receive holiday pay the amount of time for a claim to apply may be longer. The Court of Appeal in Smith v Pimlico Plumbers held that the two year claim limit did not apply. This resulted in a significant payment to the claimant from his employer.
If you need assistance with employment law please contact Jason Alcock, a Director in the Employment team. You can reach Jason on 01543 267196 or email email@example.com
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