Judgment was handed down today in the much anticipated holiday pay appeals in Hertel v Wood, BEAR Scotland v Fulton & Baxter and Amec v Law. The EAT’s judgment is likely to lead to higher future wage bills for many employers, although its findings on limitation will significantly reduce employers’ exposure to claims for unlawful deduction of wages in respect of historic holiday pay.
The appeals were heard together in a 3-day hearing before the President of the EAT. John Bowers QC appeared for Hertel and Niran de Silva appeared for BEAR Scotland (led by Brian Napier QC). The Secretary of State for Business, Innovation and Skills intervened in the appeals.
The case concerned the calculation of holiday pay of workers in the road and construction sectors, in particular whether this should include sums to take account of pay for non-guaranteed overtime (i.e. overtime which the employer does not have to offer but the employee must work if offered) and other supplemental payments.
The EAT held that:
- Article 7 of the Working Time Directive requires such payments to be included in holiday pay
- under the Marleasing principle, regulation 16 of the Working Time Regulations 1998 can be read as allowing such payments to be included in holiday pay.
However, when considering whether there was a ‘series of deductions’ for limitation purposes, the EAT held that any deduction separated from the next succeeding deduction by a gap of more than three months is out of time.
Moreover, it held that the 8 days of "additional leave” under WTR regulation 13A (which are not covered by the Working Time Directive) are the last to be agreed during the course of a leave year.
Therefore, it is likely that there will have been a substantial gap at the end of a given leave year when there were no unlawful deductions from wages (as only additional leave was taken), thus breaking the ‘series’. In practice, this may mean that many historic holiday pay claims will be limited to the most recent leave year.
John was instructed by Squire Patton Boggs and Niran by DLA Piper.