The Supreme Court has recently established that the amount of leave a part year or term time employee, employed under a permanent contract is entitled to receive must be the same as a full time employee, meaning that those who work only part of the year must still receive a minimum of 5.6 weeks of annual leave per annual leave year.
In the recent case of Harpur Trust v Brazel the Supreme Court confirmed that, as the Working Time Regulations 1998 (“WTR”) does not provide a specific method of calculation of leave entitlement for part yearly workers (in contrast to a specific method being set out to pro rata part time worker’s holiday entitlement), part yearly workers should therefore not receive a reduced amount of holiday entitlement.
The Supreme Court stated that, given the vast majority of part yearly workers work for the Public Sector, they would and should have included a provision in the WTR to set out the calculation for part yearly workers and the absence of one means that any other calculation which reduces entitlement below 5.6 weeks is unlawful.
Brazel was employed by The Harpur Trust (‘The Trust’) on a zero-hour permanent contract and she was paid for the actual hours she worked. Under this contract, Brazel did not work a full working week and for large parts of the year (due to school holidays), she did not work at all. In accordance with the WTR, Brazel was entitled to 5.6 weeks’ paid leave per year, and she was required to take this leave during school holidays. Brazel received her holiday pay in accordance with term times i.e. April, August and December and when calculating holiday pay, The Trust used a method of calculating 12.07% of Brazel’s earnings for the previous term.
Brazel argued this calculation resulted in an underpayment as if the ‘weeks’ pay’ calculation was used, whereby The Trust took an average earning over the prior 12 weeks (as per s224 of the Employment Rights Act 1996 (‘ERA’) at the time), this would result in holiday pay of around 17.5% compared to the 12.07% which was being used. Brazel relied on the WTR to claim:
- unauthorised deduction from wages for the difference in holiday pay based on the percentages, in addition to;
- a further claim of less favourable treatment on the grounds of part time working.
The Employment Tribunal (‘ET’) rejected both of Brazel’s claims. The ET held The Trust was correct to pro-rata a part-time worker’s holiday entitled to reflect the weeks a worker actually works so that full time workers are not treated less favourably. Brazel appealed this decision.
Employment Appeal Tribunal
The Employment Appeal Tribunal (‘EAT’) upheld Brazel’s appeal confirming the ET should have applied the straightforward calculation under regulation 16 of the WTR and section 224 ERA, holding there was no requirement in the WTR to pro-rate holiday pay for part-time workers in order to ensure full time workers are not treated less favourably. The Trust appealed.
Court of Appeal
The Court of Appeal (COA) dismissed the appeal confirming that building a pro-rating requirement/system of accrual into the WTR would substitute the statute entirely. The COA confirmed the calculation required by Regulation 16 of WTR which required an employer to take a week’s pay and multiplying it by 5.6 weeks should be followed regardless of whether a part-time worker receives more remuneration than their earnings as holiday pay. The Trust appealed.
The Trust further appealed to the highest court alleging the amount annual leave and pay should reflect the amount of work Brazel actually performed which is only possible by pro-rating holiday.
The Supreme Court unanimously dismissed the appeal. It was held the amount of leave which a part time worker under a permanent contract of employment is entitled to must not be pro-rated under UK law.
The Supreme Court further rejected two alternatively proposed methods for calculating holiday pay and this decision is now final.
How does this effect employers?
Whilst the legal principles which have arisen from this judgment are complex, it appears the ruling does not apply to workers who are genuinely casual workers. The principle seems to apply to employees who have permanent contracts of employment, which persist throughout the year, but who do not work every week of the year. Casual workers accrue holiday during assignments and there is no continuity between each assignment which can be contrasted with term time only staff who still remain employed during the half term and end of term holidays.
The high publicity of the case means employees may start to worry that they have been underpaid holiday pay and seek repayment for their losses and/or that they have been receiving incorrect holiday entitlement. Employees only have 3 months from the date of the latest deduction to initiate a claim for unlawful deductions and where there have been a series of regular underpayments, Tribunals will consider up to 2 years from the most recent deduction. If an employee raises a concern or consults ACAS, an employer should immediately seek legal advice.
Given the changes in calculation, there is a potential financial liability for an employer who fails to correct pay an employee holiday pay. Therefore, it is recommended that employers review their contracts and processes to ensure they are correctly calculating holiday pay for any worker who does not work the full year to minimise any risk.
To summarise, where a part yearly or term time worker is employed, employers should average the employees pay over the previous 52 weeks, with weeks in which no work is conducted being discounted from the calculation. When discounting weeks in which no work has been conducted, an employer can consider a maximum of the previous 104 weeks.
If you have any questions or are seeking advice in relation to holiday pay, a member of our employment team would be happy to help.