Landmark Ruling that Holiday Pay includes Overtime

On 4^th November 2014 the Employment Appeal Tribunal (“EAT”) gave Judgment in the joined cases of Bear Scotland Limited and Others –v- Fulton and Others; Hertel (UK) Limited – v- Woods and Others; Amec Group Limited –v- Law and Others.

The Judgment stated that all elements of a worker’s normal remuneration (including payments in respect of non-guaranteed overtime) must be taken into account when calculating holiday pay for their four weeks “EU” leave.

The holiday pay must therefore be based upon typical average pay, and not just upon basic hours’ pay (which had been the previously long established position).

All of the three cases before the EAT involved non-voluntary overtime.  Therefore it is arguable that “voluntary” overtime does not count as normal remuneration and does not come into account when calculating holiday pay.

This Judgment potentially gives a significant number of UK workers, who have only been paid holiday pay calculated on their basic hours, claims for unlawful deductions from wages.

However the Judgment has significantly limited the scope for retrospective/backdated holiday pay claims.

The failure to pay holiday pay in full can be brought as an unlawful deduction from wages claim.  A worker can bring such a claim in respect of a “series of deductions”.  In such a case, the claim must be brought within 3 months of the last deduction in the series.  It was therefore believed that this provision allowed claimants to link together a series of non/under payments in order to bring a backdated claim, regardless of the length of time that had elapsed between each deduction.

However the EAT held that if there is a gap of more than three months between any two deductions in the chain, the “series of deductions” is broken.

This part of the Judgment will severely restrict the ability of workers to pursue retrospective claims and is some comfort to employers fearing that the Judgment could lead to windfall payments for workers.

However there might still be a sting in the tail, since the EAT granted permission for the employers in all three cases to appeal this Judgment so the matter may still go to the Court of Appeal for further consideration.  This might take many months if not years to resolve!

If you are an employer who is concerned about the consequences of this Judgment then please contact Daven Naghen on 01775 722261 or email daven.naghen@maplessolicitors.com or write to Maples Solicitors LLP,  23 New Road, Spalding, Lincolnshire PE11 1DH.