Workers win groundbreaking holiday pay case

4 November 2014

A groundbreaking case at the Employment Appeal Tribunal has been won, ruling that overtime should be included in holiday pay calculations.

An EAT has today (4 November) ruled on the Bear Scotland vs Fulton case, finding that overtime pay should have been factored in to the three road maintenance employees’ holiday pay. Two other cases – Amec vs Law and Hertel vs Wood – were also included in the ruling. The employees won their original claims and the tribunal has now rejected the companies’ appeals. The cases revolve around the interpretation of the EU Working Time Directive, specifically the Working Time Regulations implemented in 1998.

The EAT decided that: “Article 7 of the Working Time Directive is to be interpreted such that payments for overtime which the employees in two appeals before it were required to work, though which their employer was not obliged to offer as a minimum, is part of normal remuneration and to be included as such in the calculation of pay for holiday leave taken under regulation 13 of the Working Time Regulations 1998. Those Regulations could be interpreted so as to conform to that interpretation. An appeal by Bear Scotland was thus rejected, as were (on these issues) appeals by Hertel and Amec.”

Workers are entitled to pay that reflects normal non-guaranteed overtime as part of their annual leave payments, which applies only to the basic 4 weeks leave in the Working Time Directive, not the additional 1.6 weeks under regulation 13A of the Working Time Regulations. The tribunal also ruled that workers can make backdated claims for a particular three-month period. Claims for arrears of holiday pay will be out of time if there has been a break between successive underpayments of over three months.

The Employment Appeal Tribunal refused to grant a reference to the Court of Justice of the European Union (CJEU), but gave permission to appeal to the Court of Appeal.

Unite executive director for legal, membership and affiliated services Howard Beckett said: “Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to. This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order.”

The coalition and the business lobby have issued predictably incendiary responses, with the department for Business, Innovation and Skills stating “We do not believe voluntary overtime should be included in holiday pay and are concerned about the potential impact on employers” and the CBI describing the ruling as a a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds” – “not all will survive” it says. Vince Cable has launched a “taskforce” to assess the matter, consisting of seven business groups and no trade unions.

Government estimates suggest that around 5 million workers – one sixth of the British workforce – get paid overtime, and will therefore be affected by this historic change going forward.

Frances O’Grady, general secretary of the TUC, said: “Failing to count overtime when calculating holiday pay is quite simply wrong. This ruling marks a victory for people who work long and hard to make a living, and who deserve to be properly paid when they take their well-earned leave.

“Scaremongering about the possible impact of this ruling is irresponsible. British business is far more robust than some of its spokespeople would admit. It’s worth remembering that in 1999 a change in the law meant that 6 million people gained more holiday entitlements and businesses easily absorbed the increase and employment continued to rise.”