Following the case of Lock v British Gas Trading (as covered in our May ebulletin here) we have had a lot of enquiries from employers asking what they should do about holiday pay.
Unfortunately, the situation is still somewhat fluid at the moment and it is difficult to give any general advice until the UK courts have decided how they are going to interpret the Working Time Regulations. (In the Lock case, the European Court confirmed that the Working Time Directive required workers not to be financially disadvantaged by taking holiday, i.e. their pay should remain the same, but the matter was sent back to the Employment Tribunal in the UK to decide how this would work in practice under UK law).
There are several cases on similar points where judgments from the Employment Appeal Tribunal are expected in the next few months. Hopefully these will give some guidance.
In the meantime, some employers are considering whether or not to pay holiday pay now based on actual earnings (i.e. including commission, bonuses, overtime etc). One of the reasons for considering this is that as things currently stand, there is potential for workers to bring claims for unlawful deduction from wages on the basis that they have been underpaid holiday pay. This could amount to a ‘series of deductions’ and arguably such claims could go back as far as 1998 (provided that the worker has the relevant continuous service).
Some commentators have argued that paying the “correct” amount (although what that would be is not necessarily clear), even if just for a short time, would break the series of deductions and prevent the worker from claiming the back pay. Our view is that the concept of breaking the series is not sufficiently tested as to be reliable, and of course by taking this step employers would risk flagging the issue of holiday pay to all workers, potentially increasing the risk of challenges and claims.
We understand that an increasing number of claims of this nature have been made to the Employment Tribunals, and that many have been stayed pending the outcome of the other lead cases on this topic.
We will of course keep you updated on this difficult issue, and if you would like to discuss any of the issues around holiday pay or any other employment law issue, please do get in touch.
If you would like to talk through a situation you are dealing with, or if you need advice on any aspect of employment law, please contact any member of the Pure Employment Law team (01243 836840 or [email protected]).