Traditionally viewed as a US phenomenon, class actions allow groups of people to bring a claim jointly, usually against their employer or a corporation. The benefit of group actions is principally reduced legal costs for the claimants, but these claims are also more likely to draw publicity, and put the employer under greater pressure to settle.

The number of wage and hour class actions in the US (pay claims which are brought by a group of employees against their employer) has increased significantly in recent years. Could the European Court of Justice’s (ECJ) decision earlier this year and the EAT’s recent decision in relation to holiday pay claims result in similar group litigation in the UK, for backdated holiday pay?

Commission and holiday pay

In Lock v British Gas Trading Ltd, the ECJ decided that where a worker’s remuneration includes contractual commission which is determined with reference to sales achieved, the Working Time Directive requires national law to take this into account when calculating statutory holiday pay. If statutory holiday pay is calculated on basic salary alone, workers will be placed at a financial disadvantage when taking statutory annual leave as no commission will be generated during the holiday period. This may deter workers from exercising the right to annual leave, which would be contrary to the purpose of the Directive.

Overtime and holiday pay

Departing from previous case law, in the conjoined cases of Hertel, Amec and Bear Scotland, in November 2014 the EAT held that workers are entitled to have pay for overtime which they are obliged to carry out factored into their holiday pay. Significantly, however, this decision limits the scope for workers to pursue claims for backdated holiday pay, as claims for underpayment of holiday pay are timebarred from the point at which there was a break of three months or more between successive underpayments.

Unite, the union which represented most of the claimants, has stated that it will not appeal the EAT decision limiting the backdating of claims. However, this part of the decision does not apply to the Bear Scotland case, and it is highly likely that this point will be challenged in the future, either at a later stage of the Bear Scotland case, or in future claims.

Class or group actions in the UK

There is no direct equivalent to US class actions in the UK, but procedures have developed in the courts to deal with group actions and multi-party claims. In the Employment Tribunal, a group of claimants can bring their claims together, with a single claim form, if their claims are based on the same set of facts. The Tribunal fees payable by claimants who are bringing their claims together are significantly lower than for an individual claimant.

Taking into account Tribunal fees and the three month limitations on backdating claims (which means that the amount of recoverable holiday pay for overtime may be relatively small) most employees are likely only to bring holiday pay claims for underpaid overtime if they can tag along with group claims which are supported and coordinated by their union. Sure enough, some trade unions are already reported to be preparing for “class-style” actions. “Commission” claims, though, will be higher value and are more likely to be pursued by smaller groups, unsupported by a union. However, we must await future developments to fully appreciate the implications of the Bear Scotland case, and on the commission front, employees are unlikely to make their move until after the Tribunal in Lock (which is reconvening in February) issues its decision on how to calculate “commission” claims