In an unexpected about turn, Unite has announced that it will not pursue an appeal against the decision of the Employment Appeal Tribunal in Bear Scotland v Fulton.
See our alert "Important holiday pay judgment handed down" for the background to this important decision.
What does this mean for the calculation of holiday pay?
For the time being, non-guaranteed overtime should be included in the calculation of holiday pay. This includes not only overtime which is compulsory for the employee, but also that which cannot be unreasonably refused.
To avoid the risk of further challenge, it would be prudent for employers to explore the inclusion of "voluntary" overtime. This is on the basis that any overtime worked regularly is highly likely to amount to 'normal pay' and should therefore be included in the calculation of holiday pay.
Is the risk of claims backdated to October 1998 dead?
In many cases the risk of claims being brought as a series of deductions will have been severely limited by the decision in Fulton. This is because more than three months is likely to have passed since the employee last took Regulation 13 leave (the first four weeks of annual leave), although that won’t always be the case.
There may be employees and workers who will be able to show that there has not been a three-month break between leave periods and who may have back-pay claims going back several years.
However, the risk of such claims being pursued is low, given the need for detailed holiday leave record-keeping, as well as the cost involved in pursuing such a claim without union backing and where a fee has to be paid.
Given that the decision in Fulton is inconsistent with earlier cases at appellate level, we might expect a challenge to the series of deductions decision in future cases. This is particularly the case given that the EAT said that an appeal on this point was arguable.
Voluntary overtime and the extent to which it is regularly worked is also likely to feature in future claims.
So as far as these issues are concerned, this is not the end to the holiday pay saga. The issue of the inclusion of commission in the calculation of holiday pay will return to the Leicester Employment Tribunal in February 2015.
So what should employers be doing?
- Include overtime which is regularly worked in the calculation of holiday pay going forward.
- Analyse the risk of potential back-pay claims which may still be possible despite the lack of an appeal.