Our thoughts on the world of employment law - and beyond.

Holiday pay – where are we going next?

Nowhere particularly scenic, and nowhere particularly fast, appears to be the answer. Those of you who have been attending our current series of update lunches will be aware of all the complex issues surrounding the calculation of holiday pay – employment lawyers are frenziedly angsting about the nuances of pay calculations, whilst employers are left scratching their heads at where the case law on all of this is heading, and employees are wondering if they have been short-changed.

There’s plenty to talk about here and we’ll save a full write-up for when the Employment Appeal Tribunal’s eagerly anticipated decision in Fulton V Bear (Scotland) and Wood v Hertel and Amec comes out – any day now, so we gather, if you can contain your excitement.   This was a full three day hearing in front of the wise and learned Brian Langstaff, and his decision should give us some measure of clarity on the question of whether holiday pay should include overtime and if so, how historic pay should be assessed.  There are weighty issues for him to grapple with, not least over the interpretation of UK regulation in line with EU law and around the social policy aims of the underlying legislation.  Hopefully, he will also address the question of how far back any claims can go, and potentially also the reference period for assessment of pay for holiday purposes (twelve weeks?  Twelve months? There is a tension in the current position in this respect).  All of these are matters we’ve been grappling with in our current discussion series, and we hope Mr Justice Langstaff will bring his customary clarity to the issue.

The catalyst for this brief post was the news today that the case of Lock v British Gas which was due to be heard by the employment tribunal next week has been postponed until February next year.  Many of you will remember that this case has been to Europe and back already, with the upshot that commission (or at least, certain types of commission) now has to be taken into account when assessing holiday pay.  However, the employment tribunal now has the job of analysing the way that assessment should take place in the circumstances of Mr Lock’s case, and we had been awaiting its decision as likely to shed light on the interplay of different commission schemes with holiday pay.  It appears that we will have to remain in the dark a while longer.

This is an area of very fertile debate – unions are understandably very firmly on the case, and employers need to take stock.  But without clarity on these issues it is incredibly hard to decide whether to act now – and risk (a) getting it wrong, depending on how the case law pans out and (b) alerting employees to historic back pay issues: or whether to wait and see, potentially also exploring whether there is some scope to break the chain of deductions or impose a holiday moratorium to put claims out of time.  That feels clunky and unattractive in the majority of cases.  My view is that doing some preliminary digging to scope out the extent to which employers may have potential issues lurking on this subject can only be sensible (though be careful about producing discoverable data via an audit), with a view to taking a more considered approach once we have slightly greater clarity (we can but hope) on the law.

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