Important Employment Law Decision…

The Glasgow Employment Appeal Tribunal has today made a landmark decision in relation to overtime and payment of this during holiday periods. This may significantly affect how overtime is paid and may also result is numerous backdated claims from employees who feel they have been paid incorrectly in the past!

A number of cases were recently heard in the Employment Appeal Tribunal concerned appeals in connection with the calculation of holiday pay

The issues

In a nut shell the Appeal Tribunal was asked;

1. To determine what was required in terms of Article 7 of the Working Time Directive (“WTD”), which relates to an employee’s right to annual leave, by way of paid annual leave. Should non-guaranteed over-time and other elements of remuneration which employees are entitled to be included in any pay due over a period of annual leave?

2. Whether the rule of conforming interpretation permits an interpretation of Regulation 16 of the Working Time Regulations 1998 and/or sections 221-224 and Section 234 of the Employments Rights Act 1996 so as to give effect to the requirement of Article 7?

3. If the answers to the above questions show that workers have been underpaid in respect of annual leave does this underpayment constitute a “serious of deductions” in terms of the Employment Rights Act in order for the affected employee to complain to the Employment Tribunal?

4. For the purposes of assessing pay in respect of annual leave, payment in lieu of notice and/or any damages for breach of contract, was the Tribunal entitled or right to find that that pay in lieu of notice should have been based on the weekly shift patterns they last worked before their contracts were terminated?

The Decision

The Appeal Tribunal dismissed the appeals of the Employers. This is significant and will have a huge affect on overtime payment in the future! The main points worth noting are;

• workers are entitled to be paid a sum of money to reflect normal non-guaranteed overtime as part of their annual leave payments;

• that applies only to the basic 4 weeks’ leave granted under the Working Time Directive, not the additional 1.6 weeks under regulation 13A of the Working Time Regulations;

• claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments (subject to the reasonable practicability test);

• travel time payments, which exceed expenses incurred and so amount to additional taxable remuneration, should also be reflected when calculating holiday pay.

What does this mean?

The Appellants may choose to appeal to the Court of Appeal but for the moment all employers MUST note that when paying an employee their annual leave entitlement (holiday pay) they must consider overtime (whether voluntary or not) and other premiums in employers’ holiday pay calculation if said overtime or premiums are paid in that employees “normal pay”.

As an added complication, this decision relates to the four weeks’ holiday pay that workers are entitled to under European law.  It does not apply to the additional 1.6 weeks’ holiday that workers receive under UK law.

Unfortunately this means that employees can now claim for backdated holiday pay that they should have been paid relating to overtime or other employee benefits paid in the normal way! Backdated payments could be for p to one year!

What should you do?

If an employee approaches you to make a claim for backdated holiday pay you should contact us immediately. There may be an argument that no payment is due or ways in which we can limit the liability to you. We will treat assess each case on its own merits and provide you with clear and concise advise whilst aiming to keep any additional cost to a minimum.  Should you have a question please do not hesitate to contact our Sarah Dodds on 01698 373 365 or sd@pomphreyslaw.com.