Workers on part-year contracts, such as term-time-only teachers, could be entitled to back pay following a ruling by the Supreme Court.
The judgment, handed down yesterday (20 July), means that employees working under such arrangements must receive the same amount of paid annual leave as those working a full year, and organisations that previously calculated holiday pay on a pro rata basis could be liable for claims of underpayment.
Upholding a previous decision by the Court of Appeal, the Supreme Court ruled in favour of Ms L Brazel, a part-time visiting music teacher employed by Harpur Trust, which runs Bedford Girls’ School.
Brazel initially brought a claim against the Trust that she was entitled to 5.6 weeks’ paid holiday per year – the minimum stipulated by the Working Time Regulation (WTR) – despite only working some weeks of the year.
Rather than having a set number of hours each week, Brazel typically works for 32 weeks of the year, and delivers between 10 and 15 hours of lessons per week, although this varies according to demand.
Brazel’s contract of employment stated that she is entitled to 5.6 weeks of annual leave per year, which is correct in line with Acas guidance. In practice, as with other education workers, she does not work for large parts of the year, including the school holidays, which exceeds the amount of holiday time she is entitled to.
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It was the arrangement between Brazel and the school that she took her leave during the school holidays. She took equivalent periods of leave during the three school breaks, of 1.87 weeks each time. The Trust calculated how many hours she had worked during the previous 12-week term, divided this by 12, and multiplied this by 1.87 to work out her holiday pay.
It had been the Trust’s policy that each employee is entitled to 5.6 weeks of leave per year, known as the ‘calendar week method’ of calculating leave. However, in September 2011, the policy was amended so that workers would receive holiday entitlement equivalent to 12.07 per cent of the hours worked per year.
This calculation was reached by dividing 5.6 by 46.4 (52 weeks minus 5.6 weeks), otherwise known as the ‘percentage method’. The Trust said this method was implemented according to Acas guidelines on casual workers.
The guidance, which has now been rewritten, stated: “If a member of staff works on a casual basis or very irregular hours it is often easiest to calculate holiday entitlement that accrues as hours are worked.”
After this policy was implemented, Brazel’s holiday entitlement was paid using this method, which was calculated at the end of each term. This method produced a lower figure for holiday pay than the previous method.
Brazel brought a claim to the employment tribunal in 2016 for unlawful deduction of wages. One example referred to was that she had taken 1.87 weeks of leave during the Easter holiday period in 2013. Her employer had paid her £452.20 for this period using the percentage method. However, the calendar week method showed that she was entitled to £687.26.
The employment tribunal at Bury St Edmunds dismissed her claims. She appealed the decision, which was upheld by the Employment Appeal Tribunal. The Harpur Trust appealed this decision at the Court of Appeal, but this was dismissed.
The Supreme Court justices found that Harpur Trust’s method of pro-rating holiday pay to account for weeks not worked was unlawful. The Trust had proposed alternative methods of calculating pay for part-time workers, but the Court said that this was “extremely complicated” and would require all employers to keep detailed records of every hour worked by employees.
Mathew Gullick QC, barrister at 3PB Barristers, one of Brazel’s lawyers in the Supreme Court case, said the judgment provided “clarity” and will be of value to term-time workers at educational institutions, as well as part-time workers whose working patterns “do not fit the traditional ‘full-time’ model”.
Joanne Moseley, employment lawyer at Irwin Mitchell, said the decision will be a “significant blow” to employers who up until now, have pro-rated holiday entitlement for part-year workers, but highlighted it will only affect workers who work for part of the year on continuous contracts. Casual and zero-hours employees who are employed for less than 12 months for short fixed periods won’t be impacted and will still be entitled to holiday based on how many hours they have worked, she explained.
Lorraine Laryea, recruitment standards director at the Recruitment & Employment Confederation (REC), said the decision will particularly affect recruitment businesses that use an employment model to engage their temporary workers, or work with an umbrella company.
She advised employers to “review their current contractual arrangements and assess their potential liability to back pay holiday pay”, as well as amend their current methods of calculating holiday entitlement and pay in line with the ruling.
Colin Godfrey, employment law specialist at Taylor Wessing, said the news was good because employers will not be required to adopt complex calculations for part-time employees. However, “those who have previously adopted a pro-rata or 12.07 per cent approach to holiday will find their wage bill increasing and the potential of claims for back-pay,” he pointed out.
Nick Hurley, partner and head of employment at Charles Russell Speechlys, said this case will be positive news for “those who are lower-paid and don’t have regular guaranteed hours”, adding that it was one of the few examples of a situation where a part-time worker was “treated more favourably than a full-time worker.”
But, he added, employers may now try to reduce holiday pay by employing these workers on zero-hours or casual contracts for short periods of time with no umbrella contract or permanent contract in place for the periods not worked so that they calculate holiday pay on the 12.07 per cent basis.