Endeavour Partnership´s Employment Law E-Brief December 20

Few will fail to have noticed the recent headlines regarding the Employment Appeal decision (Bear Scotland Ltd and others v Fulton and others UKEAT/0047/13) that even non-guaranteed overtime pay should count towards holiday pay. In the article below, Teesside’s Business Law Firm, Endeavour Partnership, unpicks some of the key aspects and implications of the decision. It is worth remembering however that the decision can be appealed and so it may be many more months before we have clarity.

1. Holiday entitlement – By way of background, employees in the UK are entitled to a minimum of 5.6 weeks (aka 28 days) paid holiday per annum (this includes bank holidays). Pro rata for part time employees.

2. This emanated from a European Directive which requires a minimum of 4 weeks (20 days), however the UK Government “gold plated” this right, granting employees here the additional 1.6 weeks paid holiday.

3. It is important to note that the Fulton decision applies only to the 4 weeks, rather than the additional 1.6 weeks.  Further, if businesses are more generous, eg granting 25 days plus bank holidays, this ruling won’t apply to that extra holiday (although contractual terms should be examined in case an implied right is given to do so).

4. Normal pay - The decision means that, rather than employers being able to pay employees on holiday at their basic pay level, any overtime that is required to be worked regularly must be taken into account (for 4 weeks of their annual leave entitlement). Ad hoc, occasional overtime is not affected. There needs to be “a certain amount of regularity” for it to form “normal remuneration”. It also appears to rule out voluntary overtime (even if this is worked regularly; the emphasis appears to be on overtime “required” by the employer, ie a compulsory element to it).  However, it is by no means clear that an argument put forward by an employee that regular and consistent voluntary overtime should not be captured in holiday pay.

5. Reference Period? - There is a lack of clarity on how a business is supposed to assess the earnings of an employee who works flexible hours, in order to establish how much holiday pay is due for any given period of annual leave. For example, a retail outlet may require high levels of overtime in the period October to Christmas.  If the reference period is 12 weeks (as in other areas of employment legislation) then clearly there will be an opportunity for a savvy employee to ask for holiday immediately after this…..How far an employer can exercise its right under the Working Time Regulations to postpone the employee’s holiday remains to be seen. 

6. Backdating – this decision offered some comfort to businesses by significantly limiting the ability for employees to claim potentially years of backdated holiday pay.  Claims must be made within three months of the deduction (or the last in a series of deductions). The Judge's ruling indicates that if there is a gap of over three months between underpayments of holiday pay then that would break the chain of deductions and claims would be out of time.  However, he used some novel and untested reasoning to reach this conclusion and he indicated that this could form the basis of an appeal to the Court of Appeal as it was “arguable”.

7. Workers can submit tribunal claims for any holiday pay paid in the last 3 months that failed to include guaranteed and non-guaranteed overtime. These claims can also go beyond the preceding three months to include previous holiday payments provided that the gap between each holiday payment does not exceed 3 months.

8. What next for employers? – It would certainly be prudent for businesses affected by this ruling to review their overtime provisions and if regular overtime is necessary, to include this in holiday pay from now on. This will then draw a line in the sand in terms of a series of claims (providing an employee hasn’t recently taken holiday and lodges a claim in the meantime). Additionally voluntary overtime should be monitored in case in the future it is decided voluntary overtime is to be included into holiday pay entitlement also.

9. We take the view that the decision is likely to be upheld, and the biggest danger is that the Court of Appeal reviews the “backdating” restriction. That being said, we await Vince Cable’s “taskforce” review of the implications of the decision with interest.

An EAT decision provides a useful reminder for businesses of the value of having clear policies and procedures in place for staff. In this case, making sure employees were aware of the limits of using the employer's email system and how use would be monitored.

The EAT held that the use of emails that had been discovered during the employer's disciplinary investigations did not amount to an unjustified interference with the employee's private life and that, in the circumstances, he had not had a reasonable expectation of privacy.

The EAT has upheld an employment tribunal's decision that a relocation of three and a half miles following a TUPE transfer was not a substantial change to bus drivers' working conditions to their material detriment. The employees were therefore not entitled to claim that they had been constructively dismissed or dismissed for the purposes of regulation 4(9) of TUPE 2006.

This decision may be seen as beneficial to employers since it suggests that the material detriment test for employees to overcome to satisfy a regulation 4(9) claim may be higher than previously thought.

An Employment Appeal Tribunal (EAT) decision provides a reminder to businesses to ensure that they have a clear adverse weather policy in place and that employees are kept as up-to-date as possible regarding any altered working arrangements during periods of adverse weather.

The EAT allowed an appeal against an employment tribunal's decision that a group of prison officers who refused to be transported by their employer via a closed road during adverse weather conditions did not have a reasonable belief that there was serious and imminent danger. The tribunal had found that it was not open to the officers to maintain they had a reasonable belief in the danger of the situation after witnessing many of their colleagues make the journey without issue.

Businesses will welcome an EAT decision on the right to time off for dependants which highlights the need for employees to ensure that they make contact with their employer to tell them why they are absent as soon as reasonably practicable for them to do so.

The employee in this case had been taking his heavily pregnant partner to hospital, at first due to illness and then because she had been admitted to give birth. However, he had failed to tell his employer the reason for his absence as soon as it was reasonably practicable to do so.