The decision has just been handed down by the EAT in Bear Scotland Ltd v Fulton & anor (and conjoined cases).  

These cases concern the calculation of holiday pay under the Working Time Directive (“WTD”), in particular whether it should include an amount in respect of “non-guaranteed” overtime (where an employer is not contractually obliged to offer overtime, but a worker is contractually obliged to perform overtime if requested).  

What the EAT held

  1. Workers are entitled to be paid a sum of money to reflect normal “non-guaranteed” overtime (which they are obliged to work) as part of their holiday pay. 

Comment: Under EU law workers are entitled to receive their “normal remuneration” when taking holiday as prescribed by the WTD - the overtime in these cases had been so regularly required by the employers as to amount to normal remuneration.  

  1. The judgment applies only to the basic 4 weeks' (20 days) holiday granted under the WTD, not the additional 1.6 weeks’ (8 days) holiday under regulation 13A of the Working Time Regulations (WTR).  

    Comment: It is not for the employee to designate whether they are taking the WTD holiday of 20 days or the additional 8 days prescribed under the WTR. This may limit the ability of workers to bring retrospective claims for underpaid holiday pay.  

  2. Claims for arrears of holiday pay will be out of time if there has been a break of more than three months between successive underpayments in respect of holiday pay (subject to the Tribunal agreeing an extension of time to bring a claim).

Comment: The EAT concluded that the workers could not claim any holiday underpayment as being an unlawful deduction of wages under the ERA 1996 using each shortfall as the last of a series of deductions where in any case a period of more than three months had elapsed between the deductions. If it is more than three months since the date of the claim, the “chain is broken” and no claim can be made in respect of it.

Looking Forward

Leave has been granted to appeal this decision to the Court of Appeal and we await any appeal application.

Following the judgment being handed down, Business Secretary Vince Cable has announced he is setting up a taskforce to assess the possible impact of the ruling on holiday pay from the EAT, including on voluntary overtime.  

The taskforce will consist of a selection of government departments and business representative groups. The taskforce will provide a forum to discuss how the impact on business can be limited.

Immediate Steps

  1. Employers should consider whether to pay employees “non-guaranteed” overtime as part of their holiday payments.  
  2. Pending any appeal to the Court of Appeal, employers should not make any offers in respect of retrospective underpayments of holiday pay to employees at this time.  
  3. Further to this, employers should review all existing overtime arrangements and contractual position of those employees affected.