Holiday Pay and Overtime

In Bear Scotland Limited and Others v Fulton and Others, the Employment Appeal Tribunal (EAT) ruled that employers should include 'non-guaranteed' overtime that is routinely worked when calculating an employee's holiday pay.

Specifically, Article 7 of the EU Working Time Directive (WTD) should be interpreted so that payments for overtime which employees are required to work but which their employer is not obliged to offer them do count as 'normal remuneration' for the purposes of calculating holiday pay in respect of annual leave taken under Regulation 13 of the Working Time Regulations 1998 (WTR).

However, the EAT went on to find that this decision only applies to the 20 days' annual leave entitlement guaranteed under the WTD, not the additional eight days' entitlement granted under Regulation 13A ofthe WTR.

Furthermore, claims for unlawful deductions from holiday pay are subject to the three-month limitation period for bringing claims laid down by the Employment Rights Act 1996 and a 'series' of deductions is broken if there is a gap of more than three months between non-payments. This put a limit on any retrospective liability on the part of employers, particularly as the EAT ruled that additional leave under Regulation 13A should be 'the last to be agreed upon during the course of a leave year'.

Recognising the importance of the issues, the EAT granted the parties leave to appeal to the Court of Appeal on all points on which they lost, but doubted whether an appeal against its main finding as regards overtime and normal remuneration would succeed.

The trade union Unite, which acted for the claimants, subsequently indicated that it would not be appealing against the limitations imposed by the EAT on retrospective claims.

When the matter returned to the Employment Tribunal (ET), it found it was bound, in the absence of any finding that it was not reasonably practicable for the claimants to bring proceedings within the normal time limit, to conclude that certain of the claims for unauthorised deductions from wages were time barred 'because the chain linking a series of deductions is broken where there occurs a period of three months or more between successive deductions' in respect of payment for the 20 days' guaranteed leave entitlement.

The claimants appealed against the ET's ruling, arguing that the earlier decision of the EAT on this point might not be binding and would lead to 'arbitrary and unfair results'. However, the EAT dismissed their arguments. None of the limited circumstances in which the EAT would depart from one of its earlier decisions existed in this case.

There was no doubt that the principle expressed in the EAT's earlier decision was binding on the ET and, in the absence of any dispute over the facts, the ET had done what it was bound to do and excluded claims where there was a period of more than three months between any two non- or under-payments.

Furthermore, it is not permissible to attempt to use a later appeal against a decision of the ET to try to overturn an earlier decision of the EAT in the same litigation. The proper course for a litigant who is unhappy with a decision of the EAT is to appeal to a higher court, which the claimants in this case had declined to do.

Contact us if you would like individual advice on what should be included as normal remuneration when calculating holiday pay.

Posted by Peter Nicholas on Monday, August 14, 2017 at 10:50 AM