The Supreme Court Delivers Harpur Trust v Brazel Term-Time Holiday Pay Ruling
– Lawyers Say Decision Will Place Significant Financial Burden On Thousands Of Organisations
The Supreme Court has today ruled that a music teacher who only worked for part of the year is entitled to the same paid holiday as colleagues working all year.
What is the potential impact of the Harpur Trust v Brazel Term Time Holiday Pay Ruling?
The Harpur Trust v Brazel focuses on the issue of whether a worker’s right to paid annual leave is accumulated according to their working pattern and/or should be pro-rated to reflect the fact that they don’t work for a full year.
The Harpur Trust employed Ms Brazel on a zero hour’s permanent contract to teach music. Her contract provided her with 5.6 weeks’ paid holiday, which had to be taken outside normal school holidays.
The Trust argued however that it could pro-rate her holiday entitlement and pay to reflect the fact that she worked fewer weeks per year than comparable full time staff and to do otherwise would lead to an “absurd result”.
Ms Brazel brought proceedings arguing that this was in breach of the Working Time Regulations and Part-time workers (Prevention of Less Favourable Treatment) Regulations.
She was initially unsuccessful, but the Court of Appeal concluded that workers engaged on permanent part-year contracts must receive at least 5.6 weeks holiday – even if they only worked for one or two weeks a year. This was on the basis that holiday could not be pro-rated because the Working Time Regulations 1998 do not include a pro-rata principle in these circumstances.
Today the Supreme Court unanimously dismissed the school’s appeal. It acknowledged that EU case law indicates that, in general, a worker’s minimum holiday allowance is determined by the number of weeks they actually work. However, there is nothing to stop individual countries having more generous provisions. Under UK law, holiday pay for people working irregular hours is determined by averaging their pay over the previous 52 weeks. Weeks where no work takes place are ignored in the calculations.
The Court acknowledged this approach slightly favoured workers, like Ms Brazel, who work atypical hours, but it did not agree that this produced such an absurd result that would justify the wholesale revision of the statutory scheme.
The long-awaited decision has been closely monitored by organisations in the public and private sectors. Many unions have been actively pursuing holiday claims on behalf of term-time only staff. In 2018, Unison helped 5,000 term-time staff employed by Greenwich Council receive compensation for unpaid holiday amounting to almost £4m. Unison also intervened in this case because the principles involved affect hundreds of thousands of other workers.
Unison has highlighted that the ruling means that all workers in the UK will now receive the same minimum level of paid annual holiday leave, regardless of how many hours they work, following a landmark legal judgment by the Supreme Court today (Wednesday 20th July 2022).
The case, Harpur Trust v Brazel was taken by music teacher Lesley Brazel. She argued her employer was wrong to give her fewer days of annual leave than the legal minimum because she only worked during the school term.
Unison continued to explain that due to the judgment from today, it will no longer be possible for employers to argue staff who don’t work all year are only entitled to holiday based on the hours they work.
According to employment lawyers at Irwin Mitchell, the ruling will have significant financial repercussions for thousands of employers with people working part of the year on permanent contracts who have pro-rated their holiday entitlement to reflect the number of weeks they actually work each year. It will be particularly significant in the education sector where term-time contracts are commonplace.
Sector reaction to the Harpur Trust v Brazel Term-Time Holiday Pay Ruling
Joanne Moseley, an employment lawyer and Irwin Mitchell, said:
“This is a significant decision and will be a blow to many thousands of employers across the UK who, up until now, have pro-rated holiday entitlement to reflect the number of weeks employees work each year. Many employers have adopted a ‘wait and see’ approach but we’re now at the end of the road. We’ve seen that organisations have been caught out by previous holiday pay rulings and this one is sure to place a significant financial burden, which could run into millions of pounds, for many.”
She added “This decision only impacts on workers who are engaged in permanent part-year contracts. Your average casual worker engaged on a zero hour’s contract won’t be affected and will only be entitled to receive paid holiday based upon how many weeks they have actually worked.”
Nick Hurley, Partner and Head of the Employment Group at law firm Charles Russell Speechlys comments:
“The Supreme Court has dismissed the appeal and upheld the decisions of the EAT and Court of Appeal. This will have a significant impact on those who work part-year/term time only under a permanent contract and any other arrangement such as zero hours employees/workers or casual workers who have an umbrella contract arrangement in place when they are not working. It will make holiday pay much more expensive for employers who have this type of arrangement and is most likely to affect those in the education sector. Although this effectively can result in a “windfall” for the particular workers – these do tend to be those who are lower paid and don’t have regular guaranteed hours. It is one of the few examples of a situation where a part time worker is treated more favourably than a full time worker and currently there is no legislation that prohibits this.
“This could open the floodgates for other part-year permanent workers who have had their holiday calculated incorrectly to bring claims for unlawful deductions from wages for any difference in what they have been paid and what they should have received although there is a two year backstop on these claims.
“One possible result is that employers may try to reduce holiday pay by engaging these workers on a zero hours or casual workers contract for short periods of time with no umbrella contract or permanent contract in place for the periods not worked so that they calculate holiday pay on the 12.07% basis.”
Andy Chamberlain, Director of Policy at IPSE (The Association of Independent Professionals and the Self-Employed) said:
“Today’s verdict from the Supreme Court on the Brazel case has clearly rejected one of the most common methods for calculating holiday pay for ‘part-year workers’. The case highlights the confusion that surrounds holiday entitlement and pay, particularly for those who work outside of traditional, full-time employment. In light of today’s judgement, we urgently need clear guidance on who is entitled to holiday pay and how should it be calculated. There are long standing concerns surrounding the treatment of holiday pay by umbrella companies – this must also be urgently addressed to ensure individuals receive their full entitlement in all circumstances.”
Commenting on the judgment, UNISON general secretary Christina McAnea said:
“This important decision means that anyone, no matter when or how they work, will now be due the same legal minimum of annual holiday.
“Teaching assistants or other education employees might only be contracted to work when schools are open, but they’re also sometimes required to do their jobs at other times.
“Today’s decision clarifies the law and says that annual leave taken by someone who works less than a full year can no longer be pro-rated to that of a colleague employed all year round.
“The government’s failure to provide guidance in this area has left workers in limbo with unscrupulous employers all too keen to take advantage. Once again this shows unions as a force for good and yet another example of how they strive to improve the lives of working people everywhere.”
Kerry Garcia, Head of Employment at Stevens & Bolton, said:
“Today’s decision will come as a blow to employers with workers who work for only part of each year (such as those with term-time only contracts), as it confirms that part-year workers will effectively be entitled to a windfall in holiday entitlement.
“Many employers will now need to make provision for higher holiday pay for their part-year workers and also face a greater risk of tribunal claims where holiday pay has previously been calculated differently.
“The ruling may seem illogical and inequitable, with employers finding it difficult to explain to their full-year workers why a colleague who works only part of the year is entitled to the same holiday entitlement. It will also be difficult to explain to a part-time worker who works the same number of hours in total as a part-year worker, but spread across the whole year, why they are entitled to less holiday than the part-year worker. Employers will need to manage any friction proactively and with sensitivity.”
“The Supreme Court has confirmed the finding of the Court of Appeal that part-year workers are entitled to receive more holiday pay than their colleagues who work throughout the year.
“Although we typically associate part-year working with the education sector, this ruling will have a far wider impact across a number of sectors as term-time only working is becoming increasingly common.
“Given the advantageous position of part-year workers, employers may now find they receive an increasing number of requests from workers to move to “term-time only” working arrangements.
“The Supreme Court’s decision emphasises the need for a consistent approach to calculating holiday entitlement for all permanent employees. It accepts that, given the myriad of different working arrangements for part-year workers, there will inevitably be anomalous entitlements for some; but that is the price that the Court is willing to pay for a less complicated and more consistent method of calculating holiday entitlement.
“Clearly, the Supreme Court was unwilling to make wholesale changes to the drafting of existing legislation. This was, in its view, the only way in which to accommodate a pro-rating approach to calculating the holiday entitlement of part-year workers and it is for Parliament to make such changes, if there is political appetite.”
Keely Rushmore, employment partner at Keystone Law said:
“The Supreme Court’s judgment in case of The Harpur Trust v Brazel, has significant ramifications for the countless employers with permanent staff who only work part of the year. This is particularly common in the education sector, where term-time working is widespread. Many affected employers had taken a ‘wait and see’ approach following the 2019 Court of Appeal ruling in this matter, hoping for a commercial and logical outcome. This was not to be, and the Supreme Court’s decision, which confirmed the approach taken by the Court of Appeal, will have come as a huge disappointment.
“Employers are not only facing increased holiday pay for term-time workers, with added complexity in calculating amounts due, but will also need to assess their potential exposure to claims for past underpayments. In addition, it may be a challenge to explain the implications of the decision to staff, bearing in mind full-time staff may feel that they are losing out in comparison to term-time staff, and many term-time staff prefer the certainty of the simple 12.07% method of calculating holiday pay adopted by The Harpur Trust and in common with many employers whose staff work irregular hours.
“Given the complexity and the potential for illogical or unfair outcomes, this could well be an area where we see legislative reform in the future.”