The correct holiday pay entitlement for part-year workers

Supreme Court clarification regarding the correct holiday pay entitlement for part-year workers

Facts:

Ms Brazel worked irregular hours as a part-time teacher, and worked on a permanent contract, but for term-time only.

Ms Brazel’s employer, Harpur Trust, calculated her holiday pay entitlement as 12.07% of the hours that she worked in the preceding term (the “percentage method”) as this was the method that had previously been adopted by most employers for calculations of this nature in the context of part year workers. It is however of note that this method was not set out in legislation anywhere but was the method that had previously been recommended by the Advisory, Conciliation and Arbitration Service (ACAS).

Ms Brazel argued that her holiday pay should have been calculated using her average earnings over a set period (the “calendar method”, this ‘reference’ period was initially 12 weeks but was increased to 52 weeks from April 2020 onwards. This would have meant that Ms Brazel’s holiday pay entitlement would have been higher.

Ms Brazel brought an unlawful deductions claim on the basis that Harpur Trust’s calculation was in breach of the Working Time Regulations 1998 (WTR) and the Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.

The Employment Tribunal found in favour of Harpur Trust. Ms Brazel appealed against this decision.

The Employment Appeal Tribunal allowed Ms Brazel’s appeal, and found that her holiday pay had been miscalculated, and her holiday pay should have been calculated using the “calendar method”.

Harpur Trust appealed to the Court of Appeal, who dismissed their appeal and upheld the decision of the Employment Appeal Tribunal.

Harpur Trust was granted leave to appeal to the Supreme Court, and made the following arguments:

EU law (from which the WTR derives) requires holiday entitlement to be pro-rated;

there were alternative, more logical readings of the statute; and

that it was absurd for the legislature to allow part-year workers to obtain the right to an amount of leave which is disproportionate in relation to that to which other workers are entitled.

The Supreme Court decision:

The Supreme Court upheld the Employment Appeal Tribunal’s and Court of Appeal’s decision and rejected Harpur Trust’s arguments. The Supreme Court confirmed that full and part-year workers were both entitled to 5.6 weeks’ holiday in full, without pro-rating. For those with no normal working hours, pay ought to be calculated by reference to the hours worked over a 52-week average, rather than being limited by the number of hours the worker has worked.

With reference to the Trust’s arguments noted above, the Supreme Court’s response was as follows:

EU law did not require holiday entitlement to be pro-rated in all circumstances, and UK legislation implementing the law did not make any provision allowing for pro-rated holiday entitlement for part-year workers.

Harpur Trust’s alternative readings of the statute were contrary to the legislation, and what Parliament intended, which was that holiday pay should be calculated in accordance with a 12-week reference period (now 52 weeks from April 2020 onwards), ignoring weeks in which no pay was received. The alternative readings would also necessitate complicated calculations requiring all employers and workers to keep detailed records of every hour worked.

The Supreme Court rejected the Trust’s “absurdity” argument, and noted that atypical workers (i.e. part year workers) were only slightly favoured, and it did not justify a re-reading of the statute.

Our comment:

This decision will have far-reaching implications beyond teachers and education (although these areas will obviously feel the impact of this decision significantly), and applies equally to all organisations who engage employees and workers on a permanent contract, but who work irregular hours and who only work part(s) of the year. Employers who engage staff on this basis must ensure they amend contracts of employment and payroll processes, and use the correct calculation to avoid unlawful deduction from wages claims. Those employers who are currently facing similar claims from employees and workers as to correct holiday entitlement should ensure they comply with the above precedent, and attempt to resolve matters through negotiation, rather than engaging in costly litigation which based on the Supreme Court decision in Harpur v Brazel they will highly likely lose.

For more information on this article, please contact Kirsten Currer or Alex Rose.