The Supreme Court has delivered its judgment in the long-running case of Harpur Trust v Brazel. Paul Seath, Damian Ward and Olivia Woodward consider the impact for employers.
Background
Mrs Brazel is a visiting music teacher at a school run by the Harpur Trust. She is employed on a permanent contract which is ongoing throughout the whole of the year, but she only works (variable hours) during term time. She is only paid for the hours she works.
Mrs Brazel’s contract states that she is entitled to 5.6 weeks’ paid leave per year, which is treated as being taken in three equal blocks at the end of each school term.
Up to September 2011, Mrs Brazel received holiday pay calculated using what the Supreme Court called the ‘Calendar Week Method’, which meant she was paid on the basis of the average of the 12 previous weeks’ pay. However, after September 2011, the Harpur Trust began to pay Ms Brazel using what the Supreme Court called the ‘Percentage Method’, which meant she was paid 12.07% of her total earnings as holiday pay. This was in accordance with ACAS guidance, which has now been withdrawn).
Mrs Brazel claimed this method meant she received less paid holiday than she was entitled to. The claim worked its way up to the Supreme Court for a final decision to determine on what basis her holiday pay should be calculated.
The Supreme Court held – following the Court of Appeal – that the Calendar Week Method is the correct method and that Mrs Brazel was entitled to be paid for the full 5.6 weeks’ holiday using this method, and that should be based on her average weekly pay for the previous 12 weeks, ignoring any weeks she did not work (the relevant reference period now being 52-weeks).
Impact
The most significant impact is that workers on permanent contracts who only work part of the year, which includes many in the music education sector and education sector more widely, as well as hospitality and health and social care, will be entitled to 5.6 weeks holiday calculated via the Calendar Week Method.
In turn, employers may need to alter their holiday pay arrangements and may be vulnerable to claims for backdated holiday pay from workers who were previously paid via a different calculation method, in particular the Percentage Method.
Nevertheless, it is important to note that in general, an individual can only bring a claim for unlawful deduction of wages going back a maximum of two years and any claim would need to be brought within three months of the last deduction.
What steps should employers take
- Clarify what method is currently used and has been used in the past to calculate holiday pay.
- Do an internal audit to determine any part-year workers who are/were on a permanent contract and who might be impacted by this judgment.
- Keep your senior management and legal advisors informed of the audit to then discuss your best strategy going forward, including a communication plan and any legal or financial risks you may face and how they can be mitigated.
If you have any questions about the impact this decision may have on your organisation or would like to discuss a strategy forward for your organisation, please get in touch directly with Paul or Damian.