Tuesday, 4 November 2014
Overtime and holiday pay - Bear Scotland v Fulton (and conjoined cases) a filip for beleagured employees
Employers should be aware that under the Working Time Regulations 1998, every employee is entitled to 20 days paid holiday a year, i.e. 4 weeks. Holiday pay is calculated on the basis of an employees normal working hours. For example, if you work a 35-hour week, then your holiday pay is based on 35 hours. However, if you are guaranteed 5 hours overtime each week, then holiday pay is calculated on the basis that your normal working hours are 40 hours week.
What happens if you work on average 5 hours overtime each week but it is not guaranteed? Up until recently, it would not have counted when calculating holiday pay. The judgment highlighted today has changed this although its auspices to not extend to not the additional 1.6 weeks under regulation 13A of the Working Time Regulations.
In April 2013, the Birmingham Employment Tribunal considered this issue in the case of Neal –v– Freightliner Ltd. It decided that Mr Neal's holiday pay should have been calculated by reference to his normal earnings, which included overtime and shift pay. The Employment Tribunal ordered Freightliner Ltd to pay Mr Neal additional holiday pay based on his overtime and shift pay.
Later in the same month, the Glasgow Employment Tribunal in the case of Fulton & Baxter –v– Bear Scotland Ltd followed the Neal decision
The Employment Appeal Tribunal has, today given judgment in Bear Scotland v Fulton (and conjoined cases).
There was a real fear prior to the promulgation of this judgment that employees may be able to claim there has been a chain of unlawful deductions in relation to EU statutory holiday pay. That could mean they can claim back-pay going as far back as 1998, potentially including interest as well. Further, employees and ex-employees may attempt to recover back-pay by bringing a breach of contract claim. The issue of back-pay has even led to speculation that some employers may be forced out of business.s reaffirmed that workers are entitled to be paid a sum of money to reflect normal non-guaranteed overtime as part of their annual leave payments. Claims for arrears of holiday pay will be out of time however if there has been a break of more than three months between successive underpayments (subject to the usual 'reasonable practicability test').
In addition travel time payments, which exceed expenses incurred and so amount to additional taxable remuneration, also count when calculating holiday pay.
The government has set up a task force to look into the impact of the ruling on businesses.