Employment Law case update: Bear Scotland Ltd v Fulton
In November last year, holiday pay and the world of employment law hit the headlines thanks to the case of Bear v Scotland. The fallout from the decision was to carry on through to Christmas.
It’s unusual for an employment law case to receive such high profile scrutiny. To see the case in perspective now, which is a little easier a few months down the line, we start with the Working Time Regulations 1998.
Working Time Regulations 1998
These regulations implemented the original European Working Time Directive, which required member states to guarantee workers 20 days annual leave. That, you will recall, was the amount of leave when the Working Time Regulations first came in. But that went up, briefly to 24 and then to 28 days where we are now.
Importantly, the original directive doesn't say how holiday pay should be calculated but leaves that to member states. From the outset, the Regulations stated that, where a worker has no fixed hours, to calculate the amount of pay they receive during their holiday you would take a calculation based on a 12 week reference period. For every other worker, who had a contract with a certain amount of hours in, it was holiday pay based on that amount of hours they were entitled to receive.
Inevitably this has always meant that there are people whose regular pay is routinely higher than what their contract provides for. Often the employer will have set a low threshold so as not to be bound to offer a certain level of work at the outset. However, over time people can be earning considerably more whether because they do a lot of overtime or earn commission or bonuses.
The Bear Scotland case applied to overtime but can be seen in the context of a line of cases.
Williams & Others v British Airways
In the 2011 case, Williams & Others v British Airways, the ECJ said that holiday pay should include not just basic salary but also anything which is:
“…intrinsically linked to the performance of the tasks which he is required to carry out under his contract of employment and in respect of which a monetary amount, included in the calculation of his total remuneration, is provided.”
Lock v British Gas
Later in 2014, the ECJ in Lock v British Gas said that commission payments should be taken into account when calculating holiday pay.
Seen in that historical context, the decision in Bear Scotland is perhaps not a great surprise in terms of its general principles.
It was a case that gained a lot of political interest, and it was perhaps underpinned by increasing evidence of workers not being able to afford to take a holiday. Because, whilst they would be paid at their basic (for example) 15 hours a week, in reality their normal working week including those 15 hours plus another 40 overtime.
As reported, Bear Scotland said that holiday pay should include overtime.
After the decision, the assumption was that there would be appeals. Because even if the basic principle was effectively beyond challenge, there were all sorts of questions arising out of that.
Did this apply to just the first 20 days holiday, which was still the number of days guaranteed under the original Working Time Directive? Was there a distinction to be drawn between mandatory and voluntary overtime? How far back could claims go?
All those issues remained live.
Subsequently, however, it became clear that a deal had been reached and there were not going to be appeals. This was perhaps influenced by the government setting up a task force – comprised entirely of business leaders with no trade union involvement at all – to limit the impact of Bear Scotland. The government also introduced new regulations in December to limit the extent to which backdated claims could be made.
Taking all this into account, the position is that overtime which employers require workers to do must count for the purposes of their holiday pay, but it must be sufficiently regular to qualify as normal. One-off periods of overtime or voluntary overtime are less likely to need to be taken into account.
The government’s new regulations require that individuals can only go back up to two years. If there is a gap of more than three months since the last time holiday pay was incorrectly paid, the employee will most likely have missed the opportunity to bring a case. It is potentially likely that all this only applies to the original four weeks (20 days) of the Working Time Directive.
Bear Scotland also suggests that you need to look at any other payment which might be ‘intrinsically linked’ to the job they do.
What this case means for you
Although there are not going to be the expected appeals in this case, the situation is still unclear. And thanks to all the publicity, many employers worried about the issue when they perhaps didn’t need to. This was exacerbated by some clients receiving standard letters issued by trade union representatives.
The first thing to do is to carry out what might be referred to as an impact assessment by looking at your organisation and working out how much overtime is regularly worked. Is that overtime you require people to do or is it voluntary? Could you make it voluntary by giving people the opportunity not to do it – safe in the knowledge that they will do it anyway?
At the same time, look at other allowances, payments etc that people receive. The best way to do that is to look at an individual’s contract of employment and see what that guarantees them. Then look at the package they receive to see where the differences are coming from.
Most clients, after the initial publicity has died down, find that it is not a significant issue, but we are of course happy to discuss further.
Need advice? We can help you
Please call Ted Flanagan on 01482 324252.
Or email firstname.lastname@example.org.
You can find out more about our Employment Law services here.
- Holiday backpay ruling: overtime to be included in holiday pay
- ZJR Lock v British Gas: commission to be included in holiday pay
- CJEU confirms holiday pay will include commission
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