Long Anticipated Decision From The Employment Appeal Tribunal (“EAT”) On Holiday Pay Announced

The EAT published its decision on the conjoined cases of Bear Scotland, Hertel and Amec cases which were brought by the Union Unite.  As many anticipated, the EAT has now confirmed that non-guaranteed overtime pay should be included in holiday pay calculations rather than just basic pay.

Whilst there are still questions such as what type of allowances should be included, and there remains a potential issue regarding whether voluntary overtime should be treated differently from non voluntary overtime, employers should now be aware that the current position is that payments in relation to regular overtime must be factored in to holiday pay (even if such overtime is not guaranteed).  This will increase holiday pay entitlements for staff going forwards, at least in relation to the four weeks’ statutory holiday entitlement deriving from the European Directive.

Whilst this will no doubt cause concern amongst those employers who regularly require their staff to work overtime, there appears to be some comfort in respect of the length of time that staff can go back in order to re-claim any lost holiday pay.

The EAT has ruled that potential claimants are bound by a three month limitation period within which to bring a claim for a single deduction from wages in respect of any unpaid holiday pay, so far, so uncontroversial.  However, they have gone on to rule that claimants are also prevented from bringing claims in relation to a “series” of deductions where there has been more than a three month gap between any of the alleged deductions.  The Judge ruled that where any series is “punctuated by gaps of more than three months” then any claim to link the deductions would be extinguished.  

This means that in most cases staff will not be able to pursue retrospective claims going back to the date of the commencement of their employment or engagement, or back to the introduction of the Working Time Regulations in 1998.   However, permission to appeal has been granted and the EAT has stated that this point is the most important one for the Court of Appeal to consider.

There are likely to be announcements from both the unions, businesses and the Government in the coming days. Vince Cable has announced that he will be setting up a task force to assess the impact of the ruling as a matter of urgency.

We will provide a further report early next week when we have analysed the full details and commentary of this important case.

In the meantime, if you would like to discuss this article in more detail, please contact a member of the Employment team.