So, what does it really mean for workers?
Point One – workers should receive (and should have received in the past) all elements of ‘normal pay’ when taking holiday. ‘Normal pay’ is that which is normally received and which is intrinsically or directly linked to tasks which a worker is required to carry out (with emphasis on the last 4 words). This will include shift allowance, commission, productivity allowance, performance based payments, taxable travelling time payments (known as Radius Allowance and Travelling Time Payment), bonuses and overtime, guaranteed and non-guaranteed, on-call allowances and weekend working premia. Expenses, occasional and ancillary costs payments should not be included.
Point Two – to enforce pay, a worker can bring a claim of unlawful deductions (section 13 of the Employment Rights Act 1996) and/or a failure to pay (Regulation 30 of the Working Time Regulations 1998). A claim for unlawful deductions needs to started in an ET within 3 calendar months (less one day) of the deduction from wages (the underpayment of holiday pay) or the last of a series of deductions being made (unless it was not ‘reasonably practicable’ [in the legal sense] to do so – in which case there may be an extension for no more than a reasonable time thereafter). The EAT has decided that any gap in a series of more than 3 months will extinguish a claim based on the original (broken) series.
Point Three – the right applies only to the minimum 4 weeks WTR statutory right to leave (and not to the Regulation 13A WTR 1.6 weeks ‘additional annual leave’) and it is the employer’s right to decide which holiday the worker takes – the minimum 4 weeks or the additional annual leave of 1.6 weeks – but that the additional annual leave ‘should be the last to be agreed upon during the course of a leave year’. In reality this could well mean that most workers, who work a January to December holiday year, may have taken all their minimum 4 weeks annual leave by the summer!
For the future, it seems likely that employers will have to bite the bullet and move to an inclusive system for paying holiday pay. These decisions are likely to be appealed – but we think that Point One is unlikely to fall following an appeal. The EAT’s decision is terrifically robust, intellectually rigorous and consistent with the whole of the recent direction of travel of the European jurisprudence.
The EAT’s decision on the “series of deductions point” is more troublesome.
It creates major hurdles for backpay claims.
We’re not persuaded by the Judge’s reasoning, and we anticipate an appeal. But by the time the appeal is heard, it will almost certainly be too late to lodge claims for extensive backpay (assuming that employers, as we predict, get their act together following this decision and start to pay properly). Of course the difficulty is: can one justify an enormous spend on ET issue fees to get claims for backpay (say, to 1998) off the ground now – a spend that would be wholly speculative since there’s no guarantee appeals will succeed? Probably not, we imagine.
Employees may have claims for backpay even on the basis of this decision as it stands – but they must act quickly, and the value of these claims might be very limited. If it’s more than 3 months since a worker’s last holiday, Point Two will defeat any claim for backpay. And Point Three is important here, too – we are only concerned with the first 4 weeks of the holiday taken in a holiday year – and that includes bank holidays (e.g. Easter). So even a holiday taken in the last 3 months won’t necessarily qualify for a claim – it would need to be a holiday relating to the first 4 weeks of your leave.
And, looking further back, if there’s a gap of more than 3 months between the last of your “first 4 weeks” in a holiday year, and the first holiday taken in the next holiday year, the “series” will be broken and again any claim for the older back pay will fail.
We suspect that the most worthwhile claims will be those where individuals have taken regular holidays on a “little and often” basis, spread throughout the holiday year – but realistically how many of those will there be?
As a minimum it will be important to establish, as soon as possible, the dates of ALL holidays taken over, say, the last 2 – 3 years. A view can then be taken about whether a viable backpay claim exists.
A negotiated approach with larger employers might prove most cost-effective – but the limitation clock is ticking, so time if of the essence – especially once employers start to factor in “normal” wages when calculating holiday pay.
If you have any questions about holiday pay or require advice about any other employment rights issue, please contact our employment rights team on 033 3344 9603, email email@example.com or complete our contact form.