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Judgment Handed Down in Important Holiday Pay Appeal

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.

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