In the landmark case of Harpur Trust v Brazel, the Supreme Court unanimously ruled on 20 July 2022 that permanent employees (and workers) who only work for part of the year (such as teachers on term-time only contracts) are entitled to 5.6 weeks’ paid holiday regardless of how many hours they have worked.
In essence, these individuals will now be treated in the same way as full-time workers for the purposes of calculating holiday pay. This also means that the 12.07% holiday pay calculation used to pro-rata holiday pay previously recommended by ACAS should no longer be used for part-year workers, as it will not be legally compliant with the Working Time Regulations and could result in a flurry of legal claims.
What is the case about?
This case was issued by a music teacher, Lesley Brazel, who was engaged on a zero-hour contract and only worked during particular weeks in the school year. She was paid on an hourly rate with reference to the hours she worked for the preceding month and she was then entitled to a pro-rated equivalent of 5.6 weeks’ annual leave per annum, which she was required to take during school holidays. In line with ACAS guidance in force at the time, Ms Brazel’s holiday pay was calculated by her employer by paying her 12.07% of her total earnings at the end of each term.
Ms Brazel argued that this method of calculation was unfair and that she should have been entitled to holiday pay with reference to her average weekly earnings over the previous 12-week statutory reference period at the time (which, since this case was originally brought, has now been increased to 52 weeks). It was Ms Brazel’s position that this calculation would result in an increased holiday pay entitlement as compared to her entitlement using the 12.07% calculation. Ms Brazel’s employer disagreed and argued that a part-year worker’s holiday must be calculated on a pro-rata basis to take account of the weeks not worked during the year.
The case started in the Employment Tribunal and was subsequently heard by the Employment Appeal Tribunal (EAT), the Court of Appeal (CA) and finally the Supreme Court. The Supreme Court found in Ms Brazel’s favour (along with the EAT and CA) and, in a nutshell, the final decision was that she should be entitled to receive the same holiday pay as full-time employees who work throughout the year. The number of hours actually worked should not therefore have had any bearing on her holiday pay.
What does this mean for employers?
Needless to say, employers across the country will be concerned about this decision, the risks that it now poses, and indeed the financial burden that it’ll place on businesses. Many employers are likely to consider this decision as being illogical and unjust.
The fundamental take-home message is that holiday entitlement can no longer be pro-rated for permanent zero-hours or part-year workers to reflect the number of weeks employees work each year – there is now an automatic entitlement to 28 days (or 5.6 weeks) holiday entitlement per annum.
It is imperative that employers now stop using the 12.07% calculation to determine holiday entitlement for part-year workers, which has been so widely used for many years. To continue to use this method could expose employers to claims for unlawful deduction from wages, discrimination on the grounds of being a part-time worker and potentially constructive unfair dismissal. Employers also need to be aware of the risk of claims for back-pay if they have been inadvertently underpaying their part-year workers as a result of using the 12.07% calculation.
We strongly urge all employers who engage workers on permanent zero-hour, casual, or term-time only contracts to urgently consider how this decision impacts them and amend their practices accordingly. Employers will also need to consider making repayments to workers who have been underpaid if they have been paid holiday in accordance with the 12.07% entitlement.
How can Wright Hassall help?
Please get in touch with our team of experienced employment lawyers who would be happy to check if you are complying with this judgment and of course alleviate any concerns that you may have. We can:
- Advise how this judgment could impact your workforce, focusing particularly on the risk of potential claims;
- Respond to any queries or concerns you may have;
- Help you revise your contracts of employment, holiday policies and working practices to ensure that you are calculating holiday pay correctly and thus minimising the risk of litigation;
- Help you mitigate the risk of litigation; and
- Provide you with bespoke training to assist you with implementing new working practices following this judgment.