How Much Holiday Entitlement Should Casual Workers and Zero Hours Workers Receive and How Should It Be Calculated?

This case has far reaching implications for practices across many sectors within the economy. In this case The Harpur Trust seeks a common-sense interpretation of the Working Time Regulations (WTR) and recognition that working part of the year should allow for a pro rata holiday entitlement and should be paid as no more than 12.07% of annual earnings (the amount a full time worker would receive).

Background

Mrs Brazel is employed by the Harpur Trust to work at one of its schools as a visiting music teacher. She is employed on a zero hours contract and is entitled to the equivalent of 5.6 weeks' annual leave per academic year. Part time employees receive pro rata holiday entitlement and pay per year to receive the same percentage as their full-time equivalents. Full time employees receive 5.6 weeks holiday leave and pay calculated as 12.07% of annual pay. (The calculation is 5.6 weeks holiday/46.4 working weeks in a full time 52 weeks per year contract = 12.07%). This calculation is used by ACAS and others as it ensures fairness between full timers and part-timers.

The Claim

Mrs Brazel sought to rely on section 224 of the Employment Rights Act (ERA) which sets out the method to calculate the weekly pay of an employee with no normal working hours. Her case was that she was entitled to 5.6 weeks' holiday pay based on her average weekly pay over the 12 weeks actually worked by her, immediately prior to the relevant holiday being taken. This would have provided more pay than the 12.07% calculation. The Harpur Trust argued that the entitlement to 5.6 weeks holiday per year should be pro-rated where the employee works fewer weeks than 46.4 weeks a year. If someone worked 26 weeks per year for example, they should receive 2.8 weeks holiday. 12.07% as a method of calculating holiday pay is a recognised way to ensure pro rating works effectively and full and part-time workers are treated equally.

The Employment Tribunal's Decision

The Employment Tribunal (ET) agreed with the employer, accepting that the amount of holiday entitlement should be pro-rated in light of both her part-time and term-time only working pattern. The ET rejected Mrs Brazel's argument that she was entitled to holiday pay in accordance with section 224 ERA. The ET found that this 12 week calculation would have entitled her, who had only ever worked between 32 to 35 weeks a year, to the same 5.6 weeks holiday pay as someone who worked full-time. This would provide for an actual 17.5% of holiday pay being more generous than for someone who work 46.4 weeks per year.

The Appeal

Surprisingly, the Employment Appeal Tribunal (EAT) allowed the appeal, finding that:

• the purpose of the relevant EU and domestic provisions is to ensure that part-time workers are not treated less favourably than those who work full-time
• there is no equivalent provision so that full-time workers may be treated less favourably than those who work part-time
• Section 224 ERA can be used to calculate the weekly pay of someone who works irregular hours
• there is no entitlement for a school to carry out an exercise in pro-rating holiday entitlement and pay for those who work part of the year (only for those who work part of the week)

The judge accepted that those working part of a week, will receive a pro rata holiday pay entitlement. The judge did not accept that those working part of the year, may have the same pro rating calculation applied to their holiday pay entitlement. Whilst the 12.07% calculation of holiday pay is widely used, this judgment means that those who work part of the year will receive a higher percentage of holiday pay. The 12.07% calculation may not be used as a cap. At the extreme, if someone worked 12 weeks, they would be entitled to a full 5.6 weeks of holiday pay, calculated as the average weekly pay over the 12 weeks actually worked achieving a significantly higher percentage of holiday leave and pay than a full time equivalent (this will not apply to full and part time teachers on a salary scale and being paid a percentage of the full time equivalent salary though). The wording of the contract of employment cannot avoid this liability. 5.6 weeks' holiday entitlement and pay is a statutory entitlement and cannot be avoided by contract drafting. The Harpur Trust have sought leave to appeal the judgment.

Comment

Whilst an appeal is being processed, it is premature for employers to change current practices. Where workers raise any queries as a result of this case, they should be informed that the position is under review. The judgment must however be considered in light of the recent European Court of Justice decision in King v Sash Window Workshop. This could mean that any underpayment of holiday pay could be backdated for more than two years, potentially to the start date of employment or 1998, the introduction of the WTR, whichever is the earlier. Employers may wish to audit their current leave and pay entitlements for casual and zero hours staff to consider the implications of the judgment. The EAT judgment as it currently stands does mean that contract wording cannot avoid its implications. It is through appeal that the position will be redressed. We will update you with further developments.

For more information, please contact Gareth Edwards in our Employment Law team on 0117 314 5220.