Ground Breaking Tribunal Ruling Means Overtime Has To Be Included in Holiday Pay

A ground breaking ruling at an Employment Appeal Tribunal (EAT) in the case of Bear Scotland v Fulton (and conjoined cases) has meant an additional burden to employers, who may now have to take into consideration any overtime their workforce have carried out when calculating their paid holiday leave.

Until this ruling, only basic pay was taken into consideration for holidays. The EAT also ruled that workers can make backdated claims for a limited period. This new ruling may be referred to the Court of Appeal which could mean a final decision is some years away.

Although the decision was welcomed by the Unions there could be major implications in companies where staff are regularly required to do overtime. It appears that the ruling was not specific about whether it applied to workers who do voluntary overtime.

Business leaders were forthright in their condemnation of the ruling. Jacqueline Webb, Chairman and Head of Employment Law at leading regional law firm Pictons says ”This is a very worrying decision for our business clients, who now face the prospect of having to find thousands of pounds to compensate workers who have willingly done and been paid for working overtime.

“Although this judgement is bound to be challenged it still adds to the worry of business owners who have struggled through the worst recession in history to keep their business in the UK. The end result of this ruling may well be that employers are forced to reduce the overtime opportunities, which will mean that the workers will ultimately lose out and gain absolutely nothing from this tribunal appeal. So many companies are stretched to the limit and this may be just one step too far”

The EAT specified their ruling as follows:

Workers are entitled to be paid a sum of money to reflect normal non-guaranteed overtime as part of their annual leave payments

That applies only to the basic 4 weeks’ leave granted under the Working Time Directive, not the additional 1.6 weeks under regulation 13A of the Working Time Regulations

Claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments (subject to the reasonable practicability test)

Travel time payments, which exceed expenses incurred and so amount to additional taxable remuneration, should also be reflected when calculating holiday pay.

The EAT refused to grant a reference to the Court of Justice of the European Union, but gave permission to appeal to the Court of Appeal (stating that ground 3 was the most significant point for the Court of Appeal to consider).

If you are worried about the impact this ruling may have on your business you can email Jacqueline Webb or contact her on 0845 263 7505

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