The Harpur Trust v Brazel (Court of Appeal)
The Court of Appeal has held that individuals who are engaged on permanent contracts but only work for particular periods throughout the year based on irregular hours, such as visiting school music teachers ("Part-year Workers"), should have holiday pay calculated with reference to their average pay in the 12 weeks immediately prior to the statutory calculation date (multiplied by 5.6), as opposed to a set – and commonly used - amount equivalent to 12.07% of total (expected) hours worked per year.
The Claimant in this case was employed as a visiting music teacher. She was engaged on a permanent zero-hours contract under which she was not obliged to provide a minimum amount of work, and worked – in practice – for around 10 to 15 hours per week during term time only (c.32 weeks per year), an arrangement which the CA described as Part-year Working. Since 2011, she had received holiday pay based on a pro-rated percentage of her total earnings during each term, with reference to her expected annual working hours as compared to a full time entitlement.
She brought a claim before the Employment Tribunal alleging that the Working Time Regulations 1998 ("WTR") require employers to calculate holiday pay in respect of Part-year workers who do not have "normal working hours" by calculating their average weekly pay for the 12 weeks prior to the statutory "calculation date" (generally the first day of leave, excluding any weeks in which no remuneration was payable), before multiplying this figure by 5.6. The CA has signalled its agreement with the Claimant's suggested approach in respect of those engaged on permanent contracts (including zero hours arrangements). Whilst the outcome may result in Part-year Workers receiving holiday pay which equates to a higher proportion of their annual earnings in comparison to equivalent full-year workers, the CA held that the WTR make no provision for pro-rating holiday pay in these circumstances and the ability to do so could not be implied based on the statutory language.
This decision provides helpful clarity in this area and will be relevant to employers who engage Part-year Workers on permanent contracts, including zero-hours arrangements. These organisations will need to urgently review their method of calculating holiday pay. This is an area which will need to be kept under close review given forthcoming legal changes in this area, including the planned increase to the holiday pay reference period mentioned above (from 12 to 52 weeks) which comes into effect from 6 April 2020, as well as the uncertainty cast on the Bear Scotland decision by the Northern Ireland Court of Appeal in recent months, which could open the way to greater historic liability for employers (see here for more information).