EAT to hear three cases on holiday pay

The Employment Appeal Tribunal (EAT) is to hear three cases on holiday pay on 30 July.

Summer holiday

The hearing follows two recent decisions around holiday pay.

In June 2014, the European Court of Justice (ECJ) ruled that an employee who dies with outstanding holiday pay should be paid this after their death.

In May 2014, the Court of Justice of the European Union (CJEU) held that the Working Holiday Directive should require commission to be taken into account when calculating holiday pay.

The three cases to be heard on 30 July are:

  • Bear Scotland v Fulton and Baxter.
  • Hertel (UK) v Wood and others.
  • Amec Group v Law and others.

Bear Scotland Ltd v Fulton focuses on whether overtime pay or shift allowances should be included in holiday pay calculations.

Nicola Rabson, employment partner at Linklaters, said: “If the EAT upholds the employees’ claims, the potential financial implications for all employers will be significant. Claims for unpaid holiday can go back many years and the number of potential claimants across various sectors and industries is vast.

“The law on holiday pay has been in a state of flux for sometime. However, we envisage that the EAT’s decision [in Bear Scotland v Fulton and Baxter] will not be the last word on this issue. As significant sums are involved, we expect the losing party, whomever that may be, to take the matter all the way to the Supreme Court.

“The clock is ticking for employers to look at their holiday pay arrangements, as well as pay practices, to ensure that they adequately meet their business needs and potential liabilities.”

Marc Meryon, partner at Eversheds, added: “Under current UK law, certain categories of worker have their holiday pay calculated without taking account of any overtime they might work. For others, overtime is only taken into account if it is compulsory and guaranteed. For others, it is included.

“The CJEU has decided that the directive that gives workers the right to 20 days’ paid holiday requires that workers should receive any supplements, such as for performing a role; allowances, which are intrinsic to their role or which reflect their status; and average commission earnings when they take their holiday. 

“In applying these CJEU decisions, several employment tribunals have decided workers should be paid average overtime earnings while they are on holiday. Some of these cases have been appealed to the EAT.

“One of the main cases, Neal v Freightliner, has just settled, but three other cases listed for the same hearing are still going ahead. 

“One possible, and perhaps most likely, conclusion of the EAT hearing is that the overtime issue will be referred to the CJEU to decide, which will of course mean further delay before the issues can be finally resolved.

“Unions are already filing claims for backdated holiday pay. Though these claims are likely to be stayed pending the outcome of the appeal cases, there have already been high-profile settlements.

“As such, now is the time for employers to evaluate their potential exposure and to consider whether any provision should be made for backdated claims. Looking ahead, employers may want to consider that elements of pay might need to be included when calculating holiday pay in future.”