The Supreme Court yesterday issued a landmark decision in the case of Harpur Trust v Brazel. This decision deals with a key principle in relation to how to deal with holiday pay for casual and part year workers. Historically, where employers have paid rolled up holiday pay, this has been at a rate of 12.07% (using a calculation based on an individual working 52 weeks a year). In the original employment tribunal case, Ms Brazel argued that this rate resulted in her being underpaid as she only worked 33 weeks a year, and had this been used in the calculation the rate would have been 17.5%.
Her claims were originally rejected by the employment tribunal, who accepted the trust’s argument that a part time worker should have their holiday entitlement pro-rated to reflect the portion of the year that they work. However, the Employment Appeal Tribunal allowed Ms Brazel’s appeal against this decision, and confirmed that the calculation must have regard to a week’s pay, taking into account the number of weeks worked with no cap of annualised hours, as had been suggested by the employment tribunal.
The Court of Appeal dismissed the trust’s appeal on this point, and confirmed that any pro-rating for casual or part year workers would not be in accordance with the statutory mechanisms. The calculation, as set out in statute, was straightforward in that employers simply had to identify a week’s pay and multiply it by 5.6, regardless of whether or not this meant that part year or casual workers received a higher proportion of their annual earnings as holiday pay compared to full year workers.
The Supreme Court has now unanimously dismissed the trust’s appeal on the basis that there is no requirement, and English law does not allow, for the leave of a part year worker to be pro-rated, in order to be proportional to a full year worker. This is despite the statutory method of calculation, which has regard to the actual number of weeks worked, leading to a part year worker receiving disproportionately more paid leave than full year workers. A more generous entitlement for part year workers does not infringe on either the Working Time Directive, or the Part-Time Workers Directive (or the UK legislation that derives from the EU directives).
Even if the trust could show that its position offered a ‘simple, principled solution to all working patterns’, it also had to show that the provisions were drafted on the basis that that is the principle underlying the provisions and should be applied. The Supreme Court did not accept that the UK Working Time Regulations, or legislation dealing with the calculation of holiday pay (s.224 of the Employment Rights Act 1996), on their true interpretation, excluded weeks that part year workers did not work from any calculation; there is no pro-rating of entitlement to that of a full year worker.
This decision could have wide-ranging consequences for schools, colleges, universities and related education institutions where a large percentage of workers are term time only, or have part year working patterns. Employers with a large proportion of casual workers, such as peripatetic staff, may also be affected. As a result of the Supreme Court’s judgment, employers will need to consider the holiday pay of term time only, part year, and casual workers.
While this topic has been under consideration for a number of years, this decision is definitive and any change in approach would now need to be achieved by a change in domestic legislation. Employers should review the holiday pay and arrangements of term time, part year and casual workers to ensure that they are correctly applying the principles set out in the Supreme Court’s decision. Given the publicity that is likely to be associated with this case, we would suggest that employers have their response to any queries relating to holiday pay from term time, part year or casual staff prepared.