Holiday backpay ruling : what will it mean to you?

[TrueBlueTerrier]

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A historic legal ruling says 5 million people could be eligible for backdated holiday pay, but don’t expect anything yet

The Employment Appeal Tribunal has ruled that overtime should be taken into account when holiday pay is assessed, following a case taken by the union Unite.

What happens currently?

Workers in the UK are entitled to 28 days off a year for which they receive pay. Some employers take into account any compulsory or guaranteed overtime when working out holiday pay, others simply use a worker’s basic pay. For people who regularly work overtime this can mean that their earnings fall when they take time off.

What does the ruling mean?

Employers will have to include your earnings from overtime when working out how much holiday pay you are entitled to. The tribunal decided that article 7 of the Working Time Directive meant that in the cases it was looking at overtime was part of the workers’ “normal” earnings and as such should be included when their holiday pay was worked out. About 5 million workers are thought to do paid overtime and the ruling sets a precedent for their employers.

However, lawyers at Irwin Mitchell said it appeared that the rules would only apply to the 20 days holidays workers are entitled to under EU law, not the full 28 days they get under UK rules. Also, the judgment does not lay out how employers are supposed to assess normal pay – whether an average should be taken over 12 weeks or 12 months. This will fall to the government to decide.

So can I claim back pay I missed out on?

Unfortunately for workers, the bad news for employers was mitigated by the tribunal’s decision to limit back payments, so the ruling will not trigger an immediate payment of years of missed pay. The tribunal said that if there was a three month gap between deductions – holiday pay without overtime – it could only rule on the latest instance. It looks like that means employees can only make a claim if they have taken a holiday within the last three months. Richard Yeomans, employment partner at Addleshaw Goddard, said that the gap may “‘break the chain’ so that the employee cannot include the earlier holidays in a deduction from wages claim”.

However, he said employees could instead consider a breach of contract claim going back up to six years.

If you are a member of a union it might be able to help. The GMB union has asked its members who did not get the same pay during holiday as during the rest of the year to get in touch with it so that it can assess their claims.

Will I get some extra pay?

It’s unlikely that you will get anything soon. Lawyers say the decision is likely to be appealed, and while it is employers will sit tight.

What will employers do?

Some lawyers have warned that they might decide not to offer overtime in future. “In the longer term, the judgement could lead to employers dispensing with overtime and other types of allowances all together in a bid to limit future liability,” said Yeomans. “As many employers and employees rely on the availability of overtime work, this would have an adverse impact on both sides.”

[TrueBlueTerrier]

Coalition seeks to limit impact of holiday backpay ruling

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Employers warn of bankruptcies and job losses but TUC challenges ‘scaremongering’ saying that including overtime in calculations is simply fairer

The government is setting up a taskforce to try to limit the impact of a landmark legal ruling forcing companies to increase the holiday pay of 5 million people who regularly work overtime.

The employment appeal tribunal (EAT) ruled on Tuesday that employers must include overtime when calculating workers’ holiday pay after test cases brought by the Unite union.

The ruling will significantly increase the holiday pay for people who work overtime in the future, although the judgment severely restricts the ability of employees to claim for backdated pay.

Under UK laws holiday pay has been calculated based on an employee’s basic salary, meaning those who regularly work overtime are often paid much less when they are on holiday. The tribunal’s ruling said employers must in the future calculate holiday pay based on workers’ normal hours, including overtime.

However, under the ruling, employees can claim back pay only if it is less than three months since their last holiday. This will significantly limit the size of potential payouts to the sixth of the 30.8m employees in the UK who regularly work overtime. Companies had feared that they could be hit with claims dating back to 1998.

Unions welcomed the decision but the government and business lobby groups vowed to fight it. The ruling could be appealed at the court of appeal and the court of justice of the European Union (CJEU).

Vince Cable, business secretary, said: “The government will review the judgment in detail as a matter of urgency. To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgment.”

The taskforce includes all of the main UK business lobby groups, including the CBI, the Institute of Directors, the Federation of Small Businesses and the British Retail Consortium.

John Cridland, CBI director-general, said: “This is a real blow to UK businesses now facing the prospect of punitive costs potentially running into billions of pounds – and not all will survive, which could mean significant job losses.

“These cases are creating major uncertainty for businesses and impacting on investment and resourcing decisions.

“This judgment must be challenged. We need the UK government to step up its defence of the current UK law, and use its powers to limit any retrospective liability that firms may face.”

Unite, the union which brought the test cases against engineering company Amec and industrial services firm Hertel, said the “groundbreaking” ruling could lead to a wave of follow-up cases.

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

“Employers will now have to include overtime in calculating holiday pay, and those that don’t should be under no illusion that Unite will fight to ensure that our members receive their full entitlement.”

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 six million people gained more holiday entitlements, and businesses easily absorbed the increase and employment continued to rise.”

If an employee has had a holiday within the past three months, they can claim for any unpaid holiday pay owed from that overtime. Claims can go back in three-month increments, if within those three months the claimant has had a holiday

Jean Lovett, a partner at law firm Linklaters, said: “The potential financial implications for many employers will be significant. 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 [tribunal’s] decision will not be the last word on this issue. As significant sums are involved, we expect the decision to be appealed.

“Due to the costs involved many employers may now look to reduce the availability of overtime, where feasible.”

[world class male]

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any appeals could take years!

[britwrit]

Yeah. This was just a speed bump until it heads back to the European courts.

The question is, what should the CWU negotiate with the company for? (Or even should they?)

[north london driver]

Yeah. This was just a speed bump until it heads back to the European courts.

The question is, what should the CWU negotiate with the company for? (Or even should they?)

if billy has any thing to do with the negotiate with royal mail on holidays we may get a day in lieu.

[jack~jack]

Dinner and drinks with moya at the savoy again.