employment contract

A landmark judgment from the Employment Appeal Tribunal (EAT) has been announced which could have significant implications for employers.

The judgment has confirmed that elements of remuneration such as overtime, commission and travel time payments, must be included in the calculation of holiday pay.  The ruling could be appealed to the Court of Appeal though, meaning that timescales for a final decision on this subject are currently unknown. It could be years away, however there is  the  possibility that it could be more imminent if any appeal is fast tracked.

The much publicised EAT case covered the issue of holiday pay in three cases: Bear Scotland v Fulton and Baxter, Hertel (UK) Ltd v Wood and others and Amec Group Ltd v Law and others; and has generated significant media interest.  The case has been very closely monitored by parties including employers, trade unions, the government and HR professionals. There was initial concern  that  we might see  a surge of claims for holiday back pay for the past 16 years, which of course could have run into millions of pounds for employers. The judgement indicates that  any claims for retrospective holiday pay deemed underpaid may only be backdated for one year – and not as far back as 1998 as hoped for by the Trade Unions.  It is also worth noting that the ruling applies only to the four weeks’ leave required by the Working Time Directive, and not the additional 1.6 weeks’ leave provided for by the Working Time Regulations.

As mentioned above, this case could yet go to the Court of Appeal. In addition, following the judgment being announced, Vince Cable, Business Secretary has announced a new task force is to be set up in order for an assessment of the impact of this ruling to be discussed, including the issue of holiday back pay.

Further details of the ruling, including guidance around backdated claims, have yet to be released. We will consider the judgement and additional information that follows, then  send out up to date guidance over the next few days. 

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