The Employment Appeal Tribunal has this morning issued its judgment in the case of Bear Scotland v Fulton: the holiday pay test cases, where a group of employees were arguing that holiday pay required to be based on “normal remuneration” received (which would include, amongst other things, payments received by way of overtime) in addition to basic pay.
The EAT has upheld the claims brought by the employees. Accordingly, under the Working Time Regulations, employees’ statutory holiday pay now requires to be calculated on the basis of their average income in the 12 week period immediately before the date(s) on which annual leave is taken, rather than simply by reference to basic pay alone.
This decision will have effect immediately and will apply to all employers. The decision has the potential to create further negative consequences for employers, coming so soon after the case of Lock v British Gas (where the court held that commission also needs to be taken into account when calculating statutory holiday pay). However, the publicised view that this decision will open the floodgates to claimants seeking backdated holiday pay going back for a number of years may not be entirely accurate. Strict limitation periods mean that a significant number of employees may now have missed the time limit for lodging a claim. This will need to be assessed on a case by case basis.
We will provide a fuller analysis of the decision and steps employers should be taking to minimise the risk to their business in the very near future.