The Supreme Court has today (20 July) ruled that employees who only work for part of the year are entitled to the same holiday pay as colleagues who work the full year, which could lead to umbrella companies liable for thousands of claims for backdated holiday pay, law firm Irwin Mitchell has warned.
The Harpur Trust v Brazel case focused on the issue of whether a worker’s right to paid annual leave is accumulated according to their working pattern, or should be pro-rated to reflect the fact that they don’t work for a full year.
The Harpur Trust employed Brazel on a zero hours permanent contract to teach music, and her contract allowed her 5.6 weeks’ paid holiday, which had to be taken outside normal school holidays. However, the Trust argued that it could pro-rate her holiday entitlement and pay to reflect the fact that she worked fewer weeks per year than comparable full time staff.
Initially, Brazel unsuccessfully brought proceedings arguing that this was in breach of the Working Time Regulations and Part-time workers (Prevention of Less Favourable Treatment) Regulations.
Following this, the Court of Appeal ruled that workers engaged on permanent part-year contracts must receive at least 5.6 weeks holiday, even if they only worked for one or two weeks a year, on the basis that holiday could not be pro-rated as the Working Time Regulations 1998 do not include a pro-rata principle in these circumstances.
The latest decision, which unanimously dismissed the Trust’s appeal, rejects previous advice taken by employers of casual and zero-hour contract workers which suggests to prorate holiday pay at 12.07% of wages for the hours worked.
Commenting on what the decision may mean for employers, Jo Moseley, senior associate solicitor at irwin Mitchell, said: “This is a significant decision and will be a blow to many thousands of employers across the UK who, up until now, have pro-rated holiday entitlement to reflect the number of weeks employees work each year.
“Many employers have adopted a ‘wait and see’ approach. But, we’re now at the end of the road. We’ve seen that organisations have been caught out by previous holiday pay rulings and this one is sure to place a significant financial burden, which could run into millions of pounds, for many.”
She added: “This decision only impacts on workers who are engaged in permanent part-year contracts. Your average casual worker engaged on a zero hour’s contract won’t be affected and will only be entitled to receive paid holiday based upon how many weeks they have actually worked.”