Holiday pay - another challenge for employers

More fun and games following the recent decision of the Employment Appeal Tribunal in Bear Scotland Ltd v Fulton & Others. This well reported decision concerns the potential effect of overtime on the calculation of holiday pay. In particular the EAT decided that in circumstances where an employer is not required to offer overtime, but when offered the employee is required to accept it, the salary from that overtime should be reflected in the level of holiday pay received by the employee. The EAT further decided that this does not apply to unpaid overtime or to overtime which the employee is at liberty to refuse.

 A further twist is that this decision applies only to the first 4 weeks of annual leave and not any further or additional holiday. This is because the current right to a total full time holiday entitlement of 28 days derives from 2 separate provisions of which only one falls within this decision. That’s all nice and clear then!

The decision also raises questions with regard to bonuses and commission payments. It is unlikely that holiday absence would have any effect on a bonus calculation but adopting the same approach it is difficult to see how commission would not be caught, although a decision on this point has not yet been made.

The Employment Appeal Tribunal has limited retrospective claims by saying that there is a 3 month limit in making a claim although care needs to be taken if there is a series of deductions (which in most cases will be inevitable) as there will then need to be a break of more than 3 months to break the chain.

The EAT has already given leave to appeal and it is difficult to imagine that this will not go further in addition to which there remains every possibility of intervention by the Government.

 It is difficult to believe that this decision will not give further ammunition to those anti EEC’ers as this all stems from the Working Time Directive. Whilst there are some who will argue that this ensures a fairer deal for employees others will use it as a further example of European driven red tape harming business and economic growth. Unless followed by a similar decision on commission I suspect this is not as much of a problem as it has been made out to be but clearly the saga has got some way to go yet.