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Holiday pay: After the EAT hearing has progress been made?

We spent three days holed up in the Employment Appeal Tribunal tweeting our commentary as events unfolded in the important holiday cases of Fulton v Bear (Scotland) and Wood and Others v Hertel and Amec.

Calculating holiday pay

 

The cases were, in summary, whether holiday pay calculations should include overtime and if so, what payments should be paid to employees in respect of historic holiday pay.

Despite the apparent simplicity of the concept that overtime should be included in holiday pay, the arguments were complex and detailed and the Judge, Brian Langstaff, is in an unenviable position of grappling with the legal intricacies.

 

 

The key legal arguments which were submitted for the Appellants can be briefly summarised as follows:

  1. There is nothing in Article 7 of the Working Time Directive which would require overtime to be included in the calculation of holiday pay. We note that Article 7 is silent on the method of calculation.
  2. Too wide an approach has been taken by the Tribunal when applying the obligation to interpret UK law in accordance with EU law (referred to as the “Marleasing” issue). In circumstances where there is a clearly defined UK scheme of rules it is inappropriate to adopt such an approach.
  3. The fixed nature of the hours was clearly defined on the facts of the Hertel and Amec cases in union negotiated collective agreements. The parties had therefore clearly addressed their minds to what should fall within and without the definition of “normal working hours”.
  4. A cross appeal by the Claimants argues that radius allowance and travel time payments should be included in the calculation of holiday pay. The distinction with these is that they are “allowances” and are not normal remuneration.
  5. The decision of the Tribunal gives rise to an arbitrary distinction between WTR Section 13 pay (“EU leave” of 20 days) and Section 13A pay (the amendment which granted the additional 8 days “UK leave”). As it cannot be distinguished which type of leave is being taken and different rules would apply to each as a result of the Tribunal decisions, the argument was advanced that there cannot be a series of deductions because every time Section 13A leave is taken it creates a break in the chain.

In our view, the second of these appeared to be the most convincing argument and the one questioned the least by the Judge, although he will clearly have to consider this carefully in light of the abundance of case law cited. All of the policy arguments about cost and administrative burden to employers were used as supporting reasons why it is inappropriate for this matter to be determined by the courts and not by Parliament. It is entirely possible that the outcome might be that UK law does not actually comply with EU obligations, but it will be for Parliament to legislate for sake of certainty and not for the courts to decide.

Michael Ford QC, for the employees gave a detailed account of European jurisprudence; unsurprisingly he wholly disagrees with the assertion that this is a question for Parliament and not for Mr Justice Langstaff. As he put it, ‘social policy forms no part of these issues’. Despite the potential impact on employers as a whole, he says this is a simple question of compensation and employee entitlement. This is something that Employment Tribunals consider every day.

Just as social policy was pushed to one side, Michael Ford QC sought to trump legal certainty with the Court’s obligation to follow what he says is the proper interpretation of Article 7. According to the Respondent, the Directive is sufficiently certain already and there has not been a single case at UK level or European where legal certainty has trumped interpretative obligations in civil matters. It was put that arguing otherwise added nothing to the issues at hand.

In the event that overtime is held to be included in the calculations of holiday pay, employers are clearly concerned with just how far back in time these deductions can be claimed. This was a particularly grave concern to all Appellants in the appeal. Despite there being a potential series of deductions over many years, surely the ability to claim for the non-payment of overtime in holiday calculations should be limited to six years and not the commencement of the Working Time Regulations? There is something called the Limitation Act after all. There was, however, very little offered by the Government’s QC as to why it should only be 6 years. Equally, Michael Ford for the employees barely addressed the look back period, presumably as it did not really concern his clients. It remains a possibility, therefore, that this case could determine the correct method of calculating holiday pay but not identify the level of historic liability for which employers could have to make a provision in their accounts.

Progress is being made; the issues have finally been listed and heard in this three day hearing in the Employment Appeal Tribunal but we are still none the wiser as to whether overtime should be (and should always have been) included in the calculations of holiday pay. We’ve heard the complex legal arguments articulated by a handful of the brightest legal minds in the country, now it’s up to Brian Langstaff to hand down his judgment. Unfortunately, he concluded the hearing with no promises as to when this would be. Some commentators suggest an outcome could be published in October. As, however, the Judge gave one of the employer’s QCs the opportunity to send in further written submissions, we are not so sure. Those written submissions would not even be received until sometime in September and our view was the Judge has been left with a lot of careful consideration.

Look out for our next blog, “What to do in the meantime”

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Legal news, views, trends and tools for HR Professionals. Stay ahead. Go further