Employment Eye – Alert! Holiday pay & overtime – follow up

Further to our earlier Alert, the full judgment of the Employment Appeal Tribunal (EAT) in the important holiday pay / overtime case of Fulton v Bear Scotland Limited and Wood v Hertel (UK) Limited has now been published. Please click here to read the full decision. As we have reported, the EAT has said that overtime pay should be included in holiday payments, and the following four key points have emerged from the judgment:

• although the overtime was non-guaranteed, it was required by the employers and regularly worked by the employees, so the employees were entitled to have that overtime included in the remuneration which had to be paid in respect of annual leave;
• payments made in respect of travel time were also part of the workers normal pay (not expenses) and should, therefore, be included in holiday pay;
• this decision applies only to the minimum 4 weeks' leave granted under the Working Time Directive, not the additional 1.6 weeks under the Working Time Regulations;
• a crucial point (made at paragraph 81 of the judgment) relates to claims for back pay.  The EAT held that the "sense" of the relevant legislation is that, if a series of holiday underpayments is punctuated by a gap of more than three months, the passage of time will have broken the series – which indicates that claims for arrears of holiday pay would be out of time if there has been a gap of more than three months between successive underpayments. This will come as a welcome development for employers as, prior to today, it has been suggested that claims relating to a series of deductions could be backdated as far as the implementation of the Working Time Regulations in 1998.

Contrary to expectations, this case has not been referred to the Court of Justice of the European Union, but it is likely that it will be appealed to the Court of Appeal given the potential financial impact on employers and the fact that permission to appeal has already been granted. We will keep you updated.

In the meantime, this case will be of critical importance to employers in both the private and public sector. We understand that the Department for Business, Innovation & Skills (BIS) will be setting up a taskforce to assess the impact of today's decision and to understand the exposure that employers may face. Please do contact me or another member of the Bevan Brittan employment team if you require any further information or guidance in respect of this issue.