Holiday pay entitlements for part-year workers

Harrison Drury’s employment and regulatory team, considers the implications of the Court of Appeal decision in The Harpur Trust v Lesley Brazel & UNISON [2019] EWCA Civ 1402 for part-year workers on permanent contracts.

Background information

Mrs Brazel, a music teacher, was engaged by Harpur Trust on a permanent contract, on a zero hours basis. Mrs Brazel was only paid for hours that she actually worked, which mainly took place during school term-time. Term-time usually made up around 32 to 35 weeks of the year, therefore, for large parts of the year, she carried out no work at all for the Harpur Trust. As such, Mrs Brazel was considered a ‘part-year’ worker by the Court.

This is a distinction from ‘part-time’ workers who may only work a few days in the week, but work every week of the year, with regular hours.

Under the terms of her contract and by statute, Mrs Brazel was entitled to 5.6 weeks’ paid annual leave, to be taken during the school holidays. The Trust made three equal payments in respect of holiday at the end of each term. On guidance provided by ACAS, the Trust calculated her entitlement to holiday pay as 12.07% of the hours worked over the preceding term.

The decision

Mrs Brazel submitted a claim for unlawful deductions from her wages, asserting that the 12.07% pro-rating approach did not correlate with the calculation required by the Working Time Regulations 1998 (WTR).

Instead, it was argued that her holiday entitlement should be paid according to section 224 Employment Rights Act 1996 (s.224 ERA 1996), specifically, at the level of her average earnings over the 12-week period immediately before holiday was taken. On this calculation, Mrs Brazel would receive a higher percentage of her total annual earnings as holiday pay.

The Employment Tribunal dismissed Mrs Brazel’s claim, however, on appeal to the Employment Appeals Tribunal it was held that her holiday pay should not be capped and the WTR included no requirement to pro-rate holiday pay for part-year employees.

Confirmation by the Court of Appeal

The Court of Appeal confirmed that there was no particular mechanism within the WTR for the assessment of holiday pay for part-year workers and there was clearly no requirement for pro-rating.

As such, there should simply be an exercise of identifying the value of a week’s pay (average of previous 12 weeks’ pay and substituting any whole weeks where there was no pay, for weeks in which payment was made) and multiplying that figure by 5.6, as required by s.224 ERA 1996.

Impact for employers

It was accepted by the Court of Appeal that this approach may, in some cases, lead to unusual decisions, whereby an employee could work only for one week of the year and receive their full 5.6 weeks’ holiday pay entitlement.

However, it is important to note that the Court made it clear that this principle would only apply to part-year workers on permanent contracts with irregular working hours. Furthermore, any claims made by employees for breach would be limited to unlawful deductions from wages made in the past two years.

Although the decision will not affect part-time workers, employers with staff on permanent, zero hours or casual contracts may be impacted where the 12.07% calculation is in place and could be open to challenge.

Employers may want to review their employee contracts moving forward and consider whether it is appropriate that casual workers and those on zero hours contracts are given  permanent contracts or is there another option?

If you require assistance regarding employee contracts or casual worker contracts, or to seek specialist legal advice from Harrison Drury’s employment and regulatory team, please call 01772 258321.