Covid-19- what will happen with holiday pay and term time working?

One of the many implications for businesses arising from the COVID-19 pandemic has been the need to explore new working practices. Although initially borne of necessity, there is now an appetite to permanently adopt solutions that have proven effective for both employers and employees alike.

The desire for increased flexibility has given rise to some interesting challenges. One such area concerns the calculation of holiday pay for those seeking to work term-time only. We’ve seen a surge of enquiries on this subject with many parents wanting to adapt their working arrangements having enjoyed the benefits of increased time with their children during the recent lockdowns. In this article we’ll address the key points for consideration based on the guidance provided by the Court of Appeal in the case of Harpur Trust v Brazel [2019] EWCA Civ 1402.

Background

The brief facts of the case are that Mrs Brazel was and continues to be employed by the Harpur Trust as a music teacher on a permanent zero-hours contract. She works term-time only and is only paid as and when she carries out work. Depending on the total length of each school term, Mrs Brazel’s yearly ‘working’ time is between 32-35 weeks long. Under her contract she is entitled to 5.6 weeks’ paid annual leave, which she is required to take during school holidays. At that time, ACAS guidance on calculating holiday pay pointed out that 5.6 weeks’ holiday for a full-time employee equates to 12.07% of their annual time worked (note that the current guidance does not make reference to the 12.07% rate). As a result, it recommended using that 12.07% to calculate holiday pay for casual workers. Following that guidance, the Harpur Trust paid Mrs Brazel her holiday entitlement in three termly instalments by calculating her earnings at the end of each term, working out what 12.07% of those earnings equates to, and then dividing that figure by three.

Mrs Brazel has challenged that approach and argues that she is entitled to the full 5.6 weeks’ leave prescribed by the Working Time Regulations 1998 (WTR), and that a week’s pay should simply be calculated with reference to her average weekly pay in accordance with the principles set out in the Employment Right Act 1996 (ERA). She has brought claims for unlawful deductions from wages and less favourable treatment contrary to the Part-Time Workers Regulations 2000 (PTW).

The Harpur Trust disagrees, stating that calculating holiday entitlement and pay in this manner would result in Mrs Brazel receiving more holiday, pro-rata, than a full-time employee (i.e. because 5.6 weeks’ paid holiday equates to 17.5% of a 32-week year). It argues that if you do less than a full year’s work, you should get less than a full year’s holiday, and maintains that the pro-rata approach it has adopted is lawful.

Court of Appeal decision

The case involves complex arguments but, after initially having her claim rejected by the Employment Tribunal, Mrs Brazel was successful on appeal to the Employment Appeal Tribunal and the Harpur Trust’s appeal to the Court of Appeal was unsuccessful. The judgment of the Court of Appeal is pending appeal to the Supreme Court (due to be heard in November 2021), but the current position is as follows:

• workers employed on permanent, term-time only contracts are entitled to the full 5.6 weeks’ holiday under the WTR regardless of how much time they actually spend working during term time
• pay for those 5.6 weeks is to be calculated using the ordinary principles set out under the WTR (now amended to use a 52-week reference period, not just 12 weeks).

At first glance it may be difficult to understand the logic behind this decision, and the Court acknowledged that it could result in a term-time only worker receiving a higher proportion of their annual pay as holiday, in comparison to a full-time counterpart. However, the Court was not persuaded that this was “unprincipled or obviously unfair”.

The Court addressed the apparent disparity between workers who only work during term-time (referred to as ‘part-year’ workers), and those who only work for part of a week (part-time workers in the ordinary sense), and clarified that both are entitled to 5.6 weeks’ holiday. It explained that the fact that part-time workers receive less than 28 days’ paid holiday is a product of the fact that they work less than five days a week, not because they are entitled to less than 5.6 weeks’ pay. Such workers can only be on holiday on days when they would ordinarily be working. The Court provided the example of a worker who works 3 days per week, and agreed that 5.6 weeks’ paid holiday would equate to 16.8 actual days holiday, not 28 (5.6 weeks at 3 days per week equates to 16.8 days in total). However, this was still 5.6 weeks’ paid leave. Like all other types of worker, the pay for those 16.8 days is to be calculated using the ‘weekly pay’ provisions of the ERA.

The Court said that the same principle should apply to term-time only workers and as a result they too are entitled to 5.6 weeks’ paid holiday. It said the correct approach was to calculate what the term-time only worker’s average weekly pay was and then multiply that by 5.6. This would therefore ensure that the quantum of their holiday pay reflected their actual working pattern and that they were not treated less favourably. There was no reason to reduce the entitlement to paid holiday simply because the worker worked term-time only.

What does this mean for employers?

It should be noted that the decision relates only to the statutory minimum holiday due under the WTR, and applies only to term-time workers who are permanently employed. However, if the Supreme Court upholds the Court of Appeal’s decision, it is almost inevitable that there will be further litigation by the different types of atypical workers seeking to benefit from having holiday calculated in the same way.

This case is naturally of significant interest to many educational employers who have historically adopted the same approach as the Harpur Trust, but with all employers looking at post-COVID working practices it could have wide-ranging implications. As a result, the outcome of the Supreme Court appeal is eagerly awaited.

This is a complex and evolving area of law and we would urge employers to get in touch for advice on the practical implications of this decision pending the outcome of the Supreme Court decision, which is expected early to mid-2022.

These articles are from the May 2021 issue of Employment and Immigration Law Update, our monthly newsletter for HR professionals. To download the latest issue, please visit the newsletter section of our website. For further information please contact Tom Sharpe or another member of Birketts’ Employment Law Team.