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Court of Appeal Determines How to Calculate Holiday for 'Term Time' or 'Part Year Only' Workers

on Wednesday, 14 August 2019.

In a case which has far reaching implications, the Court of Appeal, in the case of Harpur Trust v Brazel, considered how to calculate holiday entitlement and holiday pay for permanent staff who only work for part of a year.

Given the number of staff in schools who work irregular hours and some form of term time working, the decision is likely to prove both expensive and challenging to administer.

Background

Mrs Brazel is employed as a visiting music teacher. In common with arrangements adopted by many schools, her hours of work are dictated by pupil demand and her hours and pay vary according to this.

She only works during term times and is not required to work during the school holiday periods. She was paid in respect of her holiday pay three times a year at the start of each of the main holiday periods. The employer calculated this based on hours worked by Mrs Brazel in the preceding term and using the multiplier of 12.07%.

All workers are entitled under the Working Time Regulations 1998 to 5.6 weeks' paid leave in each year. 12.07% was the methodology suggested by ACAS in its guidance 'Holidays and Holiday Pay' to calculate this where staff did not have regular working patterns, as it equates to 5.6 weeks holiday/46.4 working weeks (so pro-rating from a full time 52 weeks per year contract).

The Case

The Working Time Regulations state that all workers are entitled to 5.6 weeks' leave each year. They also state that this should be paid based on the statutory method for calculating "a week's pay". The argument before the courts was whether the use of 12.07% met these requirements.

There are two elements to this. Firstly, whether it was possible to pro-rate the 5.6 weeks' leave entitlement to account for how many weeks were worked in the year. Although the European Directive from which the UK rights were implemented would allow some form of pro-rating (as has been established in European case law), that had not been expressly adopted in the UK Working Time Regulations. Accordingly, the argument put forward by Mrs Brazel (and subsequently Unison) was that she should be entitled to 5.6 weeks' leave a year.

Secondly, how should this be paid. Mrs Brazel also argued that that because she had no normal working hours, the amount she should be paid for her holiday should be calculated by averaging her pay over the 12 weeks actually worked immediately prior to the relevant holiday being taken (discounting any weeks where there was no pay at all), rather than using the 12.07% multiplier.

Court of Appeal Decision

The Court of Appeal's decision agreed with Mrs Brazel that technically this was the case. This means that an employee who is employed under a permanent contract, but who only works for part of the year, should receive the same holiday entitlement as an individual who works all year round. They also receive a proportionately higher rate of pay for their holiday than full year workers.

In accordance with the Court of Appeal decision:

  • There is no basis to pro-rate the 5.6 weeks' holiday entitlement for those who work part of the year (only for those who work part of the week)
  • When calculating how holiday should then be paid, this should be based on the calculation of a week's pay as set out in the Employment Rights Act, which has prescribed methods depending on whether someone has set hours or an irregular working pattern.
  • The purpose of the relevant EU and domestic provisions is to ensure that part-time workers are not treated less favourably than those who work full-time. There is no equivalent provision which means that full-time workers may not be treated less favourably than those who work part-time.

Practical Steps

This judgement potentially affects:

  • any worker who has a permanent employment contract and is employed throughout the year, but only actually works for part of the year (such as term time or term time plus workers)
  • any worker who works irregular hours, whose holiday pay entitlement has been calculated using the 12.07% (or similar) multiplier

If the Harpur Trust is granted leave to appeal the decision to the Supreme Court and is successful, it is possible that the pro-rata principle could be re-instated in terms of how the entitlement to holiday and holiday pay under the Working Time Regulations is interpreted. It may be some time before this is determined and in the meantime the Court of Appeal decision is binding.

Accordingly, we would recommend that schools:

  • Assess which members of staff are potentially caught by this decision.
  • Look at contractual documents for existing and new staff and update these to reflect the decision (although reflecting that there may be future developments).
  • Consider whether contractual arrangements could be changed if appropriate (ie through the use of self-employed or fixed term temporary contracts).
  • Consider changing practices for all other staff going forward. This is likely to involve prescribing when holiday entitlement will be taken, and paying this based on the preceding 12 weeks' average pay.
  • Quantify the risk of arrears claims. Any such claims will be brought as unlawful deduction from wages claims and need to be brought within 3 months of the last deduction, and so changing pay arrangements in line with the Court of Appeal decision will crystallise the time frame for bringing claims. In accordance with current UK legislation, any claims brought after 8 July 2015 will be limited to two years' arrears for each member of staff (although this backstop may in itself be challenged as unlawful).

For further information on this case or its implications please see our FAQs available on OnStream, or contact Alice Reeve on 0117 314 5383 or Simon Bevan on 0117 314 5238.

 

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