It has been reported that Unite has confirmed it will not appeal the recent EAT judgment in Bear, which held that compulsory overtime and allowances for travel time should be included when calculating holiday pay.
If there is no appeal then employers paying overtime or allowances must evaluate the implications of the decision for their existing holiday and working arrangements and agree or implement changes to ensure ongoing compliance. Failure to do so is likely to result in collective grievances, claims and possibly industrial action. Whilst negotiating an agreement now will probably entail compromising on issues such as the inclusion of voluntary but regular overtime, it will also (if binding) ensure that there is no risk of backdated claims arising in future. Doing a deal now also allows employers to rely on the EAT’s findings on back dated pay, whilst they remain in force.
Matters to consider
As with any negotiation, employers should understand properly their potential exposure and leverage before engaging with unions and/or employees. This means identifying:
- all elements of variable pay and working arrangements, including commission which is subject to separate litigation;
- which elements of pay are, and are not, likely to be included in holiday pay;
- the typical pattern of holidays being taken in order to quantify the risk of backdated claims succeeding;
- possible leverage/contingency – for example: Could all overtime be made voluntary? Could time off in lieu be offered instead? Could working arrangements be unilaterally withdrawn or changed? Could work be outsourced? Will your organisation enhance holiday pay for 28 days, rather than just 20 days? Can holiday, going forwards, be taken in such a way as to procure a break in the series?
- potential problem areas – for example many employers have not previously included shift allowances in holiday pay, which might mean that they are vulnerable to backdated claims going back to 1998, because such payments should always have been included; and
- the pensions implications of any revised approach.
There remains a risk that employees might try to pursue claims through other avenues, in the civil courts for example, so as to sidestep the 3-month gap applying to deductions claims. Further, given the number of claims already lodged in which holiday pay is claimed, it is quite possible, even if Bear is not appealed, that the “three month” point will be challenged in other cases in due course. There is therefore some incentive to tackle these issues now.