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Published on:November 4, 2014Author:The Debt Advisor

Following on from our earlier blog post entitled “Businesses face a potential backlash over holiday pay” a verdict has been reached. Employees have won what has been dubbed a groundbreaking case. This clarifies that going forward all employees that work voluntary overtime could now have the right to claim for additional sums when their holiday pay is calculated.

However, today’s ruling appears to allay some of these fears as the detail of the judgment limits the potential back-pay liability for employers.

Kate Hodgekiss, employment partner at DLA Piper, which acted for one of the parties, summed up:

“Today’s decision confirms that elements of pay which are currently excluded from the holiday pay of many workers must be included in future calculation. This will lead to increased holiday pay liability for many employers. However, any claims in respect of underpaid holiday pay in the past are only possible to the extent that no more than three months elapsed between any such underpayments – in practice this is likely to mean that employees can only claim in respect of one leave year rather than, as had been a possibility, in respect of all underpaid leave as far back as 1998. The impact for employers is significantly less devastating than feared”.

The ruling is likely to have the greatest impact on sectors such as retail and manufacturing, which rely heavily on overtime and commission payments.

Two test cases – Amec vs Law and Hertel vs Wood – featured prominently in the ruling.

Unite, the UK’s largest trade union, brought the cases against Amec and Hertel, and said that the ruling could lead to payouts worth “thousands of pounds” for the 16 members concerned, and “pave the way for similar cases”.

Unite’s executive director for legal, membership and affiliated services Howard Beckett said:

“Up until now some workers who are required to do overtime have been penalised for taking the time off they are entitled to. This ruling not only secures justice for our members who were short changed, but means employers have got to get their house in order.

Employers will now have to include overtime in calculating holiday pay, and those that don’t should be under no illusion that Unite will fight to ensure that our members receive their full entitlement”.

A third test case, Bear Scotland vs Fulton, saw three employees of the Scottish road maintenance company argue that overtime should have been factored into their holiday pay, and backdated to 1998 when the working time regulations were changed. This was rejected by the EAT.

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