Risk to applying 12.07% cap for Part-Time workers

The Court of Appeal (“CoA”) decision in Harper Trust v Brazel reiterates the risks to employers who apply a loose and general Working Time Regulations (“WTR”) and ACAS affiliated holiday pay calculation for part-time workers.

The Claimant was employed by the Trust as a music teacher.  She worked during the school term but did not have set working hours (as these varied depending on requirements).  She performed no duties during school holidays, but her contract continued during these times.  Her employment contract stated that she was entitled to 5.6 weeks’ paid leave.

The Trust paid the Claimant three annual payments in respect of holiday. She took issue with the fact that the Trust calculated her holiday pay by calculating her earnings at the end of each academic term and paying her one-third of 12.07% of the figure. They relied on ACAS guidelines that stated the following:

“What leave do casual workers get?

If a member of staff works on a casual basis or very irregular hours, it is often safest to calculate holiday entitlement that accrues as hours are worked.

The holiday entitlement of 5.6 weeks is equivalent to 12.07 per cent of hours worked over a year…”

The Claimant argued that this method had no bearing on her holiday entitlement or pay and said her pay should be based on her average weekly remuneration over twelve weeks as set out in the Working Time Regulations.

Whilst the Employment Tribunal found in the Trust’s favour, i.e. agreeing with the calculation by reference to the periods of actual time worked, on appeal the EAT disagreed (our blog on the EAT’s judgement can be found here).

The CoA declined to overturn last year’s EAT decision.  It suggested that ACAS’ guidance was directed at casual workers, i.e. those not generally retained by an employer outside of the periods they are required to work.

The key caveat in the CoA’s judgement was therefore, that the Claimant was on a permanent, albeit zero-hours, contract and her entitlement should be calculated as such. Her permanency was in turn a benefit to her employer as there were less onerous requirements for school safeguarding clearance. In Lord Justice Underhill’s concluding paragraphs he states:

“it does not seem to me particularly inequitable that employers who choose to retain on permanent contracts workers whom they could have engaged freelance, because doing so has particular advantages, should have to accept the additional costs that come with that choice.”

Whilst it may be prudent to see if a further appeal is sought by the Trust, employers should be wary that contracts may need to be revised to ensure a correct pro-rating formula is applied. A generalised approach, as taken by the Trust, may lead to complex and expensive claims.