Earlier this week I wrote about the Supreme Court’s decision in Harpur Trust v Brazel. That decision confirmed that every worker has the right to 5.6 weeks paid holiday a year conferred by the Working Time Regulations 1998 (WTR), with the caveat that slightly different rules apply for those who start mid way through the year in first year of employment. The fact that a worker does not work full time throughout the year does not derogate from that right – they are still entitled to 5.6 weeks paid leave a year and the leave cannot be pro-rated a a percentage of the leave entitlement of a full time worker.
I want to follow up that with a brief and more practical follow up. The judgement is not unexpected, as the Employment Appeal Tribunal and Court of Appeal before it made the same decision, but with the Supreme Court’s decision there is no so finality to the issue. So, what does the judgment mean for workers and what should trade unions be doing?
First of all every worker (you must be a worker to benefit from the WTR) who works part of the year only (think term time workers, seasonal work, etc) should check two things.
Although not an issue in Harpur Trust v Brazel are you receiving paid holiday pay at all (the issue was whether the calculation of holiday pay payable was correct)? This is unlikely to apply in many cases but just this week I have seen one case where that appears to be the case. In addition, you should check whether your pay includes the full holiday pay at 5.6 weeks, or percentage of this. If it is just a percentage then it is probable there have been deductions from wages.
To give a worked example of a worker who works for six months a year every year for the same employer. If when you are working you receive a fixed £400 a week when in work, but nothing when not then your average wage is worked out based on the weeks you’re working, not your average over the whole year (which would be c.£200). Employer’s like Harpur Trust (for purpose of this example but, in truth, the legal issue was more complex), who were following ACAS advice, calculated holiday pay using a calculation 5.6 weeks * £200; meaning a worker would receive £1,120 in holiday pay. By contrast, if only week’s worked are included in the calculation the calculation becomes 5.6 weeks * £400, equalling a much more meaningful £2,240 per annum in WTR paid holiday pay. Calculations are rarely that simple but the principle is hopefully clear. In Harpur Trust v Brazel the issue was not so much the the average wage but whether holiday was paid in full for 5.6 weeks in all cases or a percentage of that period if workers worked part of the year only but the end result for workers is the same.
If you have been underpaid you may have a valid claim for a deduction of wages under section 13 of the Employment Rights Act (1996) – unfortunately, for reasons below, this is probably not a breach of contract so a claim must be in an Employment Tribunal. If this applies, now’s the time to seek advice from your trade union because time is already running.
In this respect the legal right to receive itemised payslips in section 8 of the Employment Rights Act 1996 is also important (a right now also due to workers as well as employees). I think unless a worker is paid consistent throughout the year that this should also include details of periods worked and holiday pay.
For unions, and especially recognised unions (with associated powers to receive information) now is a good time to reflect on the constituencies of your branches, are there cohorts of workers who could be affected by this judgement? Whilst some sectors, such as tourism and education will be disproportionately affected I think many sectors will have some workers affected by this issue, at least to the extent that unions need to be sure that part year workers are not paid every pay period (in which case this case will not apply). If there are then I think this is an opportunity to organise those workers and support group claims and seek to resolve issues on a collective bargaining basis (without prejudicing members’ rights to assert rights legally). For time limit reasons there is a tension here as, legally, many workers are probably already irretrievably out of pocket as a result of law changes made in 2014 before they even have opportunity to consider their position.
This is another decision that, even during a cost of living crisis, Conservative ministers may well characterise as generous and look to legislate to overturn the decision so I think there is a need for unions to be on a watching brief over coming months.
Blocked from a remedy?
If the decision in Harpur Trust v Brazel has, as I think it has, provided an opportunity for trade unions and workers to secure additional back pay for part year workers (and these are, I think, more likely to women) it has also crystallised a big problem. After the decision thousands, and possibly tens of thousands of workers will be newly alert to the possibility that their employers have been underpaying them substantial amounts of pay for many years, possibly all the way back to 1998 when the WTR was enacted with thousands of pounds of unpaid wages at stake.
It is here that a 2014 piece of secondary legislation signed into law by the Liberal Democrat Employment Minister Jo Swinson (and later leader of the LD’s) is likely – on my reading – to substantially nullify the effect of the new-found legal rights to unpaid holiday pay confirmed by the Supreme Court decision. Introduced as the the number of holiday pay claims were gathering pace (then focussed on relation of overtime to normal pay) the Deduction from Wages (Limitation) Regulations 2014 substantially reduced the rights of workers to recover pay under the WTR.
Whereas previously recovery could be sought for a series of deductions going back in time, so long as not interrupted by a period of three months or more where deductions were not made. However, a new clause was introduced at section 23(4A) meaning there was a limit of two years prior to the date a claim was issued in which a worker can seek to recover payment. The effect, which is grossly unfair, especially in cases like this where a worker will only become aware of the right more than two years after the date of payment is that a worker is left without any right to seek recovery of the payments to which the Supreme Court have now established she was legally due.
Enterprising readers may be thinking “If I can’t recover the unpaid wages I was due under the as an unauthorised deduction of wages claim then I will just pursue this outside the Employment Tribunal system and make a claim in the small claims track for breach of contract.” Unfortunately, Jo Swinson also deprived affected the workers of doing that as well which, save for an enterprising lawyer (infringement of property rights under Art 1 Protocol 1 maybe?), means employers will be able to enjoy and retain the wages that were due to workers over many years, and even within the last six years.
The 2014 legislation also introduced a change to regulation 16(4) of the WTR which expressly disapplied the right for paid leave to be implied as a contractual right that could be enforced in the courts. It is possible a worker’s actual contract may expressly incorporate the right but it is very unlikely so, again, disbarred workers affected from pursuing in the small claims court with its longer limitation periods. And so, for many part year workers discovering this week they have hundreds or thousands of pounds that their employers unlawfully did not pay them they have been deprived of these at the outset by employment law reforms made by the Liberal Democrat Minister for Employment some twelve years’ ago.
If I am right on this (and if you think I am wrong please let me know), it is a cruel imposition upon thousands of workers, and most likely a majority of women workers. And it is a boon to employers who now find that now their illegality has been discovered and workers have moved on to pastures new or the non-payments were either two years ago (so recovery barred under the 2014 Regulation) or more than three month’s ago (and so recovery barred by 3 month limitation period and inapplicability to contractual claims) they are laughing all the way to the bank with their shareholders.
For workers affected therefore the only real legal remedy is through the gateway of s 13 of the Employment Rights Act 1996 and, if the last non payment was more than three month’s ago throwing oneself upon the mercy of the Tribunal that it was not “reasonably practicable” to make the claim until now as the legal right has only just been made known to you (but i would not be optimistic of the chances of a positive outcome).
For unions then these obstacles only emphasise the importance of engaging employers and seeking negotiated settlements that go beyond the individual legal rights of members because law is not on the worker’s side here, but a just cause is. It may be that recovery of unpaid wages for affected workers is a trade dispute in the making because the remedy offered by the law will offer little, if any, remedy for many of those affected.
And all because of a stroke of pen by Jo Swinson.
Where they may just possibly be some hope is in pensions. If holiday pay is unpaid/underpaid then so was (in all likelihood) pension contributions of the employer if based on % of income. Outside of contract and deductions of wages could workers pursue employers for unpaid contributions through the Pensions Ombudsman?
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