Court of Appeal decision will have long standing consequences

Court of Appeal decision will have long standing consequences

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Employers and employment lawyers alike have been keeping a watchful eye on the case of The Harpur Trust v Brazel.

It is the case of a music teacher who challenged her employers’ definition of her employee status, arguing she should be given the same holiday pay as a full year worker. 

The case, which was heard by the Supreme Court on 9 November 2021, has far reaching implications for the way in which employers calculate holiday pay.  

The background

Under the Working Time Regulations 1998, all workers are entitled to 5.6 weeks’ paid leave a year.  However, for staff who are not required to work 52 weeks a year (“part-year workers”), ACAS guidance suggests using a multiplier of 12.07% to pro-rate their holiday entitlement.  

The Harpur Trust applied this to their employee, Mrs Brazel, who is engaged as a music teacher and, like many teachers, works only during term-time.  

She was given holiday pay three times a year at the start of each of the main holiday periods, calculated by multiplying the hours she had worked in the preceding term by 12.07%.  

Mrs Brazel brought a claim against her employer arguing that, because she was a worker within the meaning of the Working Time Regulations 1998, her holiday should not be pro-rated and she too should be entitled to 5.6 weeks’ paid leave, the same as any worker who works throughout the year.  

The Court of Appeal agreed with Mrs Brazel that, technically, she was right; however, it granted The Harpur Trust permission to appeal the decision to the Supreme Court.  

The Court of Appeal’s decision is binding, unless or until it is overturned by the Supreme Court. 

This effectively means: 

  • there is no legal basis to pro-rate the 5.6 weeks’ holiday entitlement for part-year workers;  
  • all full-time employees employed under a permanent contract should receive the same holiday entitlement, regardless of whether they are part-year or full year workers; and 
  • part-year workers, therefore, receive a proportionately higher rate of pay for their holiday than full year workers. 

What is the impact? 

The decision could also extend far beyond just part-year workers. This is since the Harpur Trust’s method of calculating holiday pay is routinely used in many other employment relationships, namely in relation to agency workers and those engaged on short-term contracts. 

Many employers, predominantly educational establishments, now fear being inundated with unlawful deduction from wages claims from a large proportion of their workers.  

Some have acted quickly and have adjusted their holiday pay calculations or paid unpaid holiday pay to their part-year workers. Others have decided to wait and see if the decision is overturned on appeal before taking any action. 

Practicalities of the decision

As things currently stand following the Court of Appeal’s decision, there are a number of inconsistencies and practical issues in relation to the law on holiday pay.  

For example, it is widely accepted that part-time workers’ holiday entitlement is pro-rated, so a worker who is permanently contracted to work two and a half days a week will be entitled to 50% of the holiday entitlement of a full-time worker.

However, following the Court of Appeal’s decision, another worker who works full-time for 6 months of the year and does not work for the other 6 months, would be entitled to 100% of the holiday entitlement of a full time worker.

These two workers, who technically work the same number of hours in the year for the business, are entitled to vastly differing quantities of holiday.  

In addition, a worker is employed on a permanent contract that requires them to work full-time in June each year at a festival.

Following this decision, provided this worker is engaged on a permanent contract, they would be entitled to a full 5.6 weeks’ holiday, more than the number of days actually worked in any given year by the worker.

Employers would welcome some clarification on these two points from the Supreme Court.

What should employers be doing now?

In anticipation of the Supreme Court’s decision, HR teams should consider reviewing their holiday pay practices and assessing the business’ potential liability for unpaid holiday pay.

This is in case the Supreme Court confirms the Court of Appeal’s decision that part-year workers are entitled to 5.6 weeks’ paid holiday without pro-rating.

In particular, it would be sensible for HR teams to: 

  • Assess the number of workers that could be impacted by this decision;  
  • Review the business’ current holiday pay policy/the wording in workers’ contracts and whether these might need to be amended;  
  • Assess whether, going forward, alternative contractual arrangements (such as fixed term temporary contracts) might now be preferable in respect of certain business roles; and 
  • Quantify the risk of backdated claims in respect of unlawful deductions from wages from part-year workers.

This article was first published in HR Review, read here

 

 

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