Court of Appeal in holiday pay for part year workers clarification

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25 September, 2019

The Court of Appeal gave a ground-breaking judgment in Harpur Trust v Brazel & UNISON regarding the calculation of holiday pay for 'part year' workers last month.

Mrs Brazel was employed by The Harpur Trust as a part time music teacher. She was employed on a zero hours contract and worked mostly during term time. Her contract of employment entitled her to 5.6 weeks annual leave reflecting her statutory entitlement and she was obliged to take her holidays outside of term time. The Trust followed Acas guidance calculating holiday pay at 12.07% of her annualised hours for periods of annual leave, paid in three instalments at the end of each term. She complained that this was not correct and meant that she was being underpaid during her holiday periods.

The Trust argued that taking any other approach would give Mrs Brazel an unfair windfall because she did not work for the standard 46.4 week working year (52 weeks less 5.6 weeks statutory leave). The Employment Tribunal concurred with the Trust and Mrs Brazel appealed the decision.

The EAT found in Mrs Brazel's favour, disagreeing with the Tribunal's finding that there was a need to pro-rate holiday entitlement so as to ensure full time employees are not treated less favourably or to avoid the windfall for employees such as Mrs Brazel who work fewer weeks than the 'standard' working year. The EAT stressed that for someone who has no normal working hours, the correct approach is to apply section 224 Employment Rights Act 1996 and work out her normal week's pay based on the pay received in the 12 week period prior to taking annual leave. The EAT recognised that this could produce anomalies, which might favour an employee such as Mrs Brazel who did not work throughout the year, but found that that the legislation was unambiguous.

The Court of Appeal upheld the EATs decision, acknowledging that although it may be surprising that workers who only work part of the year should be entitled to a greater proportion of their earnings as holiday pay than workers who worked all year round, this was not necessarily unfair. The Court of Appeal confirmed that the Working Time Regulations do not make any provision for pro-rating in the manner set out in the Acas guidance as applied by the Trust for such workers.

Prior to the findings in this case, many employers faced uncertainty as to what to pay in respect of holidays for employees who do not work regular hours, whether part time employees, casual or zero hours staff. However, employers will no longer be able to simply pay 12.07% annualised hours as holiday. Doing so will leave employers vulnerable to claims for unlawful deductions from wages. The Court observed that it would more appropriate for staff working part of the year only to be engaged on a freelance basis rather than, for example, on a zero hours contract. Moving forward we advise employers to carry out an audit of worker status to identify workers that may be classified as part year workers and take legal advice as to whether changes to holiday pay calculations should be applied.

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