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Holiday pay case could open floodgates for backdated claims Holiday pay case could open floodgates for backdated claims
(about 3 hours later)
Millions of workers who receive overtime or commission payments could discover they are entitled to additional holiday pay if an employment tribunal rules in their favour this week.Millions of workers who receive overtime or commission payments could discover they are entitled to additional holiday pay if an employment tribunal rules in their favour this week.
Judgment in three related cases could open the floodgates to a new round of backdated financial claims on the scale of the scandal surrounding the mis-selling of Payment Protection Insurance (PPI). A ruling in favour of the claimants could lead to similar claims for back pay over the last 16 years that will run into the hundreds of millions of pounds, according to experts. Judgment in three related cases could open the floodgates to a new round of backdated financial claims on the scale of the scandal surrounding the mis-selling of Payment Protection Insurance (PPI). A ruling in favour of the claimants could lead to similar claims for back pay over the past 16 years that will run into the hundreds of millions of pounds, according to experts.
The holiday pay cases involve employees of industrial services company Hertel, roads maintenance business Bear Scotland and engineering group Amec and were heard by an employment appeal tribunal during the summer.The holiday pay cases involve employees of industrial services company Hertel, roads maintenance business Bear Scotland and engineering group Amec and were heard by an employment appeal tribunal during the summer.
The ruling is keenly anticipated by trade unions, businesses and the government. The decision may eventually be appealed up to the higher courts or referred to the court of justice of the European Union (CJEU) in Luxembourg whose judgments are binding on the UK. The ruling is keenly anticipated by trade unions, businesses and the government. The decision may be appealed up to the higher courts or referred to the court of justice of the European Union (CJEU) in Luxembourg, whose judgments are binding on Britain.
The dispute centres on whether holiday pay should be based on employees’ basic income or their average earnings – which would include overtime and commission earnings and be much higher. The dispute centres on whether holiday pay should be based on employees’ basic income or their average earnings – which would include overtime and commission payments and be much higher.
The current pattern of holiday pay entitlement in the UK is not uniform. Some already take overtime into account if it is compulsory or guaranteed. The pattern of holiday pay entitlement in Britain is not uniform. Some take overtime into account if it is compulsory or guaranteed. The complex case revolves around the EU’s working time directive which gives staff the right to 20 days paid holiday a year. Some tribunal decisions have been made, looking at past CJEU rulings, that average earnings should be used as the basis for holiday pay calculations.
The complex case revolves around the EU’s working time directive which gives staff the right to 20 days paid holiday a year. Some tribunal decisions have already decided, looking at past CJEU decisions, that average earnings should be used as the basis for holiday pay calculations. In dispute is whether the UK working time regulations, which implemented the directive, give force to this more generous interpretation of holiday pay, whether such enhanced rewards should apply to holidays longer than 20 days, and whether the average income should be based on pay received over the previous 12 weeks or a year.
In dispute is whether the UK’s working time regulations, which implemented the directive, give force to this more generous interpretation of holiday pay, whether such enhanced rewards should apply to holidays longer than 20 days, and whether the average income should be based on pay received over the previous 12 weeks or a year. This year a tribunal in the case of Lock v British Gas Trading Limited found that commission should now be included in an employee’s holiday pay.
Earlier this year a tribunal in the case of Lock v British Gas Trading Limited found that commission should now be included in an employee’s holiday pay.
Lawyers for the employers in the Hertel, Bear Scotland and Amec cases argued that there was nothing in the working time directive requiring overtime payments to be included in annual leave calculations and that existing UK regulations should not be trumped by more generous EU law provisions.Lawyers for the employers in the Hertel, Bear Scotland and Amec cases argued that there was nothing in the working time directive requiring overtime payments to be included in annual leave calculations and that existing UK regulations should not be trumped by more generous EU law provisions.
Edward Goodwyn, an employment expert at the law firm Pinsent Masons who was involved in some of the earlier holiday pay cases, told the Guardian that the implications were far reaching.Edward Goodwyn, an employment expert at the law firm Pinsent Masons who was involved in some of the earlier holiday pay cases, told the Guardian that the implications were far reaching.
“This could costs companies millions in future,” he said. “One consequence is that employers may say they will give staff shorter holidays. The trade unions are also in a difficult position as well. I assume they want to get a slice of cash [for their members] but if they push too hard they could damage their own interests. We don’t know how much this could cost. It could clog up employment tribunals with back claims. Every individual claim will have to be assessed. It could bring the tribunals to a grinding halt.” “This could costs companies millions in the future,” he said.
Chris Tutton, employment partner at law firm Irwin Mitchell, said the outcome “could represent a major blow to some UK companies and cast a shadow over the wider economy.” He added: “If the employment appeal tribunal upholds the earlier decision, affected businesses could face the very real prospect of having to pay huge backdated payments to staff.” Irwin Mitchell believes back payments could run to a total of “hundreds of millions of pounds” if a ruling in favour of the claimants prompts similar claims. “One consequence is that employers may say they will give staff shorter holidays. The trade unions are also in a difficult position as well. I assume they want to get a slice of cash [for their members] but if they push too hard they could damage their own interests. We don’t know how much this could cost. It could clog up employment tribunals with back claims. Every individual claim will have to be assessed. It could bring the tribunals to a grinding halt.”
Chris Tutton, employment partner at law firm Irwin Mitchell, said the outcome “could represent a major blow to some UK companies and cast a shadow over the wider economy.” He added: “If the employment appeal tribunal upholds the earlier decision, affected businesses could face the very real prospect of having to pay huge backdated payments to staff.”
Irwin Mitchell believes back payments could run to a total of “hundreds of millions of pounds” if a ruling in favour of the claimants prompts similar claims.