??Part-year workers must be paid a statutory minimum of 5.6 weeks of holiday per year without pro-rating the total! ??

As we look back at the most interesting cases of 2022, Harpur v. Brazel stands out as one particular case which is expected to have long lasting effects on sectors which employ workers with irregular hours. The case was decided in the Supreme Court in July this year (2022) and reading on may just save a number of employers a penny or two.

The Background:

Ms Brazel worked for the Bedford School as a Visiting Music Teacher. She did not have regular hours, instead working only during term time, for a total of around 32 weeks each year. She did not work outside of term time, however she was employed on a full-time contract by the school.

At the end of each term, the school, owned by the Harpur Trust, would pay Ms Brazel her holiday pay, however the trust changed the way it calculated Ms Brazel's holiday pay in 2011, which resulted in a shortfall for her.

The fatal change in calculation method made by the Harpur Trust was to multiply the number of hours that Ms Brazel worked in each term by 12.07%, effectively pro-rating her holiday pay against the number of hours she had worked rather than against a full-time entitlement.

The phrase "pro-rata" is the same as "in proportion" and is a concept often used for calculating part time staff's holiday entitlements in comparison to those of their full-time colleagues. By this calculation, an employee on a full-time employment contract working 5 days a week, 9 to 5 should expect the statutory 28 days' annual leave, while a colleague working 2.5 days per week on the same hours could expect 14 days on a pro rata basis.

Simply put, you receive as much holiday as you do hours you work in proportion to a full-time colleague. This approach was one that the Harpur Trust thought was fair - and on the face of it, they would appear correct.

The new method, while different, was a commonly accepted (and formerly ACAS-approved but now withdrawn) way of calculating holiday pay for part-time (but not necessarily part-year) workers. 12.07% is a representation of the statutory minimum holiday allowance of 5.6 weeks, or 28 days, as a percentage of the number of working weeks in each year of 46.4.

Brazel, on the other hand, believed that her holiday pay should have been calculated following the statutory rules set out in the Working Time Regulations, which state holiday pay should be based on average earnings over a 12-week period (now 52 weeks), ignoring any week in which no pay was received. Brazel claimed to have suffered financially as a result of her employer's chosen method of calculating her pay on a pro-rata basis.

Brazel was a full-time employee that was only required to work on a part-year basis, a point which was crucial to her case.

The case history:

Astonishingly, this case started in 2015 and is what would now be classified as a 'stale case', or one that has been around for a long time, and is a classic example of how even the courts can disagree amongst themselves.

The Employment Tribunal who first heard Brazel's case found that Brazel was plainly wrong. The Harpur Trust argued that as Ms Brazel worked fewer than the standard 46.4 working weeks each year, her holiday should be calculated based off the amount of time she worked (32 weeks), multiplied by the statutory full-time holiday entitlement of 12.07%. They said that to use the Working Time Regulations calculation, which discounted unpaid weeks, would leave Ms Brazel with a higher comparative rate of holiday pay than a full-time full-year employee. The case was dismissed.

However, Brazel was not prepared to accept that ruling and she quickly appealed to the Employment Appeal Tribunal in Central London.?

The Employment Appeal Tribunal overturned the lower Employment Tribunal's finding and stated that Brazel was correct in her analysis of the calculation and the Working Time Regulations.

Like all these great employment cases, it did not end there. It would seem that The Harpur Trust, based in Bedford and established in 1566 (some 450 years ago), were also not going to give in.

The Trust appealed to the Court of Appeal in 2019, which found that the Working Time Regulations did not require holiday for term-time workers to be reduced pro-rata; meaning holiday pay should be calculated using their average earnings over a 12-week period (now 52 weeks as mentioned above) - Brazel had won again.

But the trust appealed again, but this time to the Supreme Court.

The Supreme Court is the final court of appeal in the United Kingdom for all cases. Any ruling made by the court will be final and binding on all lower courts.

The final verdict:

Unanimously, the Supreme Court judges rejected the Harpur Trust's arguments that were:

1. It was absurd that a worker who only worked for a few days a year would benefit from larger holiday entitlement than a person who who worked full-time.
2. There were other, more logical and sensible readings of the law, and lastly
3. European Union laws (from which the Working Time Regulation comes) states that holiday entitlement must be pro-rated.

The Court confirmed the position that 5.6 weeks' holiday is the entitlement and applies to part-year and full-year working. An employer is not entitled to pro-rate holiday pay.

Pay should be determined by reference to the hours worked over a 52-week average for individuals without regular working hours rather than being constrained by the amount of hours the employee has put in and not by reducing their entitlement by a percentage.

Who will the case specifically benefit and what is a part-year worker?

The main groups are those such as schools who use part-year workers as teachers, teaching assistants, invigilators, cleaners, and lunch-time supervisors.

Part-year workers are employees who have a permanent contract but are only needed to work for part of the year, or as and when required. The judgement will have implications for term-time workers mainly but also those on flexible arrangements, such as zero hour, casual and irregular workers who have no normal working hours.

Other sectors with staff who only work term time will be affected too as many employers only require some employees to work part-year in order for them to manage their child care duties during the holidays.

Employers who spread staff pay evenly over the year do not need to worry as that method is already Working Time Regulation compliant.

What should employers do now?

Well, firstly, it's important to remember that this judgement by the Supreme Court only affects employees and workers. It does not relate to those who are genuine contractors. I say genuine because, since the big Uber case, the Employment Tribunals will be looking much closer at contractors' setups to ensure they aren't only contractors in name to avoid the legal burden on employers.

As mentioned above, the law on this issue is now settled and there are no further routes to appeal. The only possible hope would be for Parliament to change the law by statute, which I can't see happening any time soon.

My first advice to clients is to now review their policies and holiday practices to assess if they comply with the judgement, and whether they have any outstanding liabilities. Reaching out to your employment lawyer now for legal advice would be a good place to start, or you can contact us at Britton and Time Solicitors if you are without representation.

Consider the following:

• Be proactive. Conduct an audit to see if any of your employees are affected by the judgement. What is your company's financial exposure? Companies should work out the difference between what has been paid out and what should have been. The advice would be to make the payment promptly to save any negative publicity. However, if you decide otherwise, it might be sensible to save the difference in case any claims are raised.
• A claim for unlawful deductions from wages can go back two years. When conducting your audits, it would be a good idea to go that far back, however any employee wanting to claim must do so within three months (less one day) from the date of the last deduction.
• Speaking to your insurance broker is also vital. Keeping them informed of your exposure and liability will ensure you have the correct cover in place should you need to make a claim.
• The unions are very aware of this judgment and will no doubt be jumping on it like a trampoline! UNISON was able to make submissions in the Brazel case even though they were not a party to the case in general, so don't think you are safe and that they might not know about the judgement.
• Think about making 'back payments'. If you are going to make them then how far back are you going to go? You should be discussing these issues with your senior leadership teams, lawyers and PR advisors. Communication is key to avoiding any financial disasters.

If you have found this helpful then please share with your network so that other company owners, HR executives and directors can be better informed and prepared for the potential impact on their business. If you need any further information on this article or independent legal advice then you can contact me on 0203 007 5500, email - [email protected], or through the website at www.brittontime.com.

This article is no substitute for bespoke legal advice specific to your circumstance and you should speak to your employment solicitor for comprehensive advice.