Hello. I am David Clarke and welcome to the Turcan Connell video cast on employment law. I’m here with Turcan Connell experts, Lizzie Bremner and David Ogilvie. There has been a very significant judgement at the end of last year, in the Bear Scotland case, Lizzie can you tell us a bit more about that please?
Yes, the Bear Scotland against Fulton case was a decision relating to holiday pay. It was a decision of the Employment Appeal Tribunal in London and they decided that overtime should be included as normal pay for the purpose of calculating holiday pay. So, employers, who have workers who work overtime, need to include the payment for overtime, when calculating their workers’ holiday entitlement or holiday pay. The reference period for that calculation is the twelve weeks prior to the taking of the holiday. So, when employers are looking to calculate a normal week’s pay, they need to look at what’s happened in that 12 weeks before the holiday was taken and include any payments for overtime. There have also been recent cases, which provide that payments such as commission should be included when calculating holiday pay, and payments that are intrinsic to the role so, other payments, such as flying allowances for pilots, need to be taken into account too.
David, this is a burden for employers. Has there been a big effect from this decision?
You’re quite right, it is an extra burden, unfortunately, for employers, and it’s another layer of complexity and cost for employers. But there are two things that, I think, we should bear in mind, which are important. The first is that when we are talking about holiday pay here, we are only talking about holiday pay in respect of working time directive holidays so, at the moment, those are four weeks per year. So, if you work five days per week, then it’s four times five, it’s 20 days. You may be entitled to 34 days or 35 days holiday so the contractual top-up of 15 days would be calculated a different way – we’re only talking about the working time directive element, so that’s the first point. The second point is that the employment appeal tribunal has held that the normal 3-month rule for bringing claims applies, so this has hopefully put an end to fears that people had that they would be faced with claims going back to 1998 and those claims, of course, could be very very substantial. So, as the judgment currently stands, I understand it is under appeal and, of course, the appeal may be successful, but as we sit here today the position is that claims have to be brought within 3 months of the non-payment, if you like, of the overtime amount.
Notwithstanding those limitations that you mentioned, is there any chance that there will be a flurry of claims in relation to this?
Anecdotally, we believe so, yes. Trade unions have been very active in going around the country and advising their members of their rights to bring claims if they have, in fact, not received overtime payments as part of their holiday pay, for the working time directive holidays. So, we are aware of a number of claims, which are being brought, and we, in fact at Turcan Connell, have given a lot of advice to our employer clients, particularly charities, large charities, who pay overtime as and when they need to, about the possible risks to them and about steps they might take in order to mitigate those risks.
What action, if any, can employers take to protect themselves in relation to this judgment?
Well the first thing, of course, we have to say is, let’s get it right moving forward. So, if people are entitled to be paid overtime or commission as part of their holiday pay, then they have to do that. So that's the first thing we have to say to people. The second thing is that doing so does two things; firstly, it protects the employer moving forward, but secondly, and rather helpfully, it also increases the difficulty for any employee who wants to bring a claim, because it starts the three month time limit running, which they would otherwise have to bring a claim within. So there’s that twin benefit of protecting yourself moving forward and also adding a little extra layer of protection in respect of historical claims.
Thank you Lizzie. Thank you David. For more information on Turcan Connell and how it can help you with employment law go to turcanconnell.com.