Holiday Pay - Lessons Learnt from Recent Cases
Recently, we have seen an influx of cases relating to holiday pay in the courts. We set out below two cases which may be of particular interest to schools.
Plumb v Duncan Print Group Limited - can an employee carry over holiday pay when off sick?
The Employment Appeal Tribunal (EAT) has held that, in order to carry over unused statutory holiday in to the next leave year, workers on sick leave are not required to prove they were unable to take holiday due to their medical condition, merely being on sick leave is sufficient.
In addition, the EAT held that the right to carry over holiday is not unlimited and should be limited to 18 months from the end of the leave year in which the leave accrued, and domestic legislation should be interpreted as such.
In this case, the claimant took four years' sick leave from 2010 to 2014. On termination of his employment, he requested payment for his accrued leave from 2010. The EAT found the claimant to be entitled to payment in lieu of accrued unused statutory leave for the third year of his absence which was carried over and not taken prior to termination.
Best Practice
Whilst both parties have been granted leave to appeal, subject to that, this decision clarifies that leave accrued during sickness absence cannot be carried over indefinitely.
This case highlights the need for clear employment documentation, limiting the accrual to statutory entitlement and thereby avoiding the argument that accrual should also apply to contractual leave. This limitation is important not only during sickness absence but also during maternity, paternity and other types of family leave, as well as on termination of employment.
The duration of Mr Plump's absence in this case is extreme. Nevertheless, schools more often than not offer generous sick pay provisions, and sickness absence throughout an academic year is not unheard of. The need for effective absence management, including early intervention, is key to reducing associated costs and avoiding successful litigation.
Patterson v Castlereagh Borough Council - should voluntary overtime be included in holiday pay?
Yes, provided it amounts to 'normal remuneration', held the Northern Ireland Court of Appeal. The decision, which follows on the back of the high profile Bear Scotland case, confirmed that voluntary overtime is not excluded as a rule from the holiday pay calculation.
The Northern Ireland Court of Appeal stressed that each case will need to be decided on its facts, and will depend upon whether voluntary overtime is normally carried out and forms an appropriately permanent feature of a worker's remuneration, to trigger its inclusion in the holiday pay calculation.
Best Practice
Although not legally binding on the courts and tribunals in England and Wales, this case is likely to have significant persuasive value, and indicates how similar cases will be decided going forward.
Unhelpfully, the Northern Ireland Court of Appeal did not provide any guidance on the tests that will be applied to determine whether voluntary overtime will amount to 'normal remuneration' in any given case.
Until further guidance on this issue is provided, schools should consider whether voluntary overtime arrangements are an appropriately permanent feature of employee remuneration and make adjustments to holiday pay accordingly.
More helpfully, claims for backdated deductions from wages, including holiday pay, presented on or after 1 July 2015 are now subject to a two year limit, therefore limiting the potential liability of employers going forward.