Welcome to 2015 which promises to be a busy year from an employment law perspective. To give you a head start, we set out below a summary of the key changes due to be implemented this year. As holiday pay continues to be an evolving issue we also discuss the latest position. With the General Election taking place in May there remains an element of the unknown regarding what the year will bring post May. We will keep you updated!
2015 Employment Law changes
Click here to view table.
Inevitably the compensation limits for Tribunal claims will also increase in April 2015 and the National Minimum Wage will increase in October 2015. It is expected that these new figures will be released in February and March 2015 respectively. It is also anticipated that in October 2015 a new maximum penalty for failure to pay the National Minimum Wage of £20,000 per unpaid worker, rather than £20,000 per employer, will come in to force.
Holiday Pay Update
Since our last update on holiday pay issued in November 2014 following the Bear Scotland Limited & Others v Fulton & Others decision, we would like to draw the following points to your attention.
- The Bear Scotland Limited decision does not appear to have been appealed. For now, we are left with the position set out by the Employment Appeal Tribunal, which is that the 20 days’ of annual holiday pay derived from the Working Time Directive must be calculated in accordance with European case law. This means holiday pay should be based on pay that is normally received and includes payments linked intrinsically to the performance of the tasks which the worker is required to carry out under their contract of employment and payments which relate to the worker's professional and personal status. The specific types of pay which should be included are guaranteed and non-guaranteed overtime and allowances which are not "intended exclusively to cover occasional or ancillary costs". It is anticipated the Lock v British Gas case will also confirm the inclusion of commission.
- It is still unclear what reference period should be used to calculate holiday pay in these circumstances. The European Court of Justice has suggested it is for the national court to work that out by taking an average over a reference period that is "considered to be representative". Previously the Advocate General has suggested 12 months is a suitable reference period, however the Employment Rights Act 1996 uses a reference period of the last 12 working weeks to calculate pay where necessary. We may get some clarification when Lock is heard in February 2015, but until then it has to be assumed Tribunals will consider the appropriate reference period on a case-bycase basis.
- The potential liability for backdated holiday pay claims was held to be 3 months since the last underpayment under the Bear Scotland case. While there is the potential this point may be appealed in future case law the Government has also reduced the possibility of large backdated claims by introducing the Deduction from Wages (Limitation) Regulations 2014. For all employment claims presented on or after 1 July 2015, all unlawful deductions claims regarding holiday pay will be subject to a “backstop” date of two years prior to the date the claim is lodged. The regulations also state the Working Time Regulations 1998 does not confer a contractual right to paid leave which is intended to prevent holiday pay claims being brought in the civil courts as breach of contract claims and thereby avoiding the 3 month time limit imposed by Tribunals.
In summary, we suggest a review of your employment contracts and policies may well be in order as a result of the employment law changes of 2015 and continuing holiday pay saga.