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Eversheds comment: UK EAT rules in favour of claimants in holiday pay and overtime cases

  • United Kingdom


    In July, the Employment Appeal Tribunal (EAT) embarked on a three day hearing to determine whether employers should pay – and should historically have been paying - workers holiday pay based on their overtime earnings. Today, the EAT has held that the claimants’ holiday pay should have been calculated to include overtime. Simon Rice-Birchall, partner at Eversheds comments:

    “The employers lost on their main arguments, as the EAT held both that holiday pay should be based on typical average pay and that it could interpret the Working Time Regulations as being compatible with the Working Time Directive. This means that holiday pay will need to be calculated to include overtime and similar payments in the future, subject of course to any appeal.”

    “However, the judgment holds positive news for employers as regards back payments, as claims in respect of back pay will not be possible if there has been more than three months between payments in which there has been a shortfall. The EAT also held that payment for “additional” leave, or holiday provided to UK workers by the Regulations which is additional to the holiday required to be provided by Europe, cannot form part of the series of deductions which the worker can claim, so increasing the likelihood of employment tribunals being unable to make awards for back payments of holiday pay going back years.”

    “These two findings will significantly limit workers’ claims for back payments.”

    “The Government will also be breathing a sigh of relief. Had the EAT found that it was impossible to interpret the Regulations compatibly, it is likely to have resulted in the Government having to “pick up the tab” for past liability, as the fault for failing to properly implement the Directive would have lain at its door. Further, the EAT’s decision as regards back payments may dampen cries for the Government to amend legislation urgently to prevent the possibility of employers having to make back payments since 1998.”


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