4th November 2014

Post-Halloween Terror for Employers

Post-Halloween Terror for Employers

Halloween may be over however many businesses still face a potentially terrifying event tomorrow.

On 4 November 2014 the Employment Appeal Tribunal (EAT) will issue its decision in the much-publicised Bear Scotland Limited v Fulton and others case.  This case will prove to be one of the most important UK employment cases for many years.

What is the history of this case?

A group of employees successfully persuaded an employment tribunal that their employer, Bear Scotland Limited, should have included regular, but non-contractual, overtime in their calculations for the workers’ holiday pay.  The employment tribunal held that overtime which a worker could refuse on reasonable grounds should be included in holiday pay calculations.  Bear Scotland and some associated employers appealed the decision to the EAT on the basis that this decision is contrary to the “traditional” concept that holiday pay does not have to include payment for any overtime which the employer is not contractually obliged to provide to the employee.  The EAT is due to issue its decision on this case tomorrow.

Why has this happened?

As we know, each worker is entitled to 5.6 weeks’ holiday each year, paid at the rate of a week’s pay, in terms of the UK’s Working Time Regulations 1998.  The European Working Time Directive 2003 states that all workers must be entitled to paid annual leave.  However the manner in which a worker’s pay is calculated whilst on annual leave is left to national legislation or practice.  The EU Directive has been interpreted to preclude national laws which pay workers holiday pay based on basic salary alone.  The European Court of Justice has already made it clear that “normal remuneration” includes not only basic salary but also any other remuneration which is “intrinsically linked to the performance of tasks”. 

What can the EAT choose to do?

The EAT has a number of options open to it.  One option may be for it to find that the employment tribunal, which determined the Bear Scotland case, has taken too wide an approach in applying UK law in accordance with EU law.  This option may result in a finding that UK law does not actually comply with EU obligations and a presumption that this issue will require to be addressed by Parliament (and not the courts).  Unfortunately the more likely option is that the EAT will affirm the employment tribunal’s decision that holiday pay should include payments received by an employee over a 12-week reference period including any voluntary overtime.

In any case, there will be much publicity affecting tomorrow’s judgment and employers should be taking urgent steps to assess whether or not this judgment affects their own practices with a view to avoiding unrest amongst the workforce or, worse still, time-consuming litigation with each of its employees.

Simon Allison
Partner – Employment Law
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