Government Reforms (1):  Brexit – What’s the Deal with No Deal?

What do we already know?

We have updated you in previous Newsletters (see here) that when the UK leaves the EU, with or without a deal, free movement of people will be allowed to continue for a transitional period from the exit date for approximately two years.

EU citizens and family members who want to continue to live and work in the UK beyond 30 June 2021 (or 31 December 2020 if there is a no-deal Brexit), will need to apply to the EU Settlement Scheme. (Those who have indefinite leave to enter or remain, or who have citizenship, do not need to apply to the scheme).

Employers may like to support their UK-based EU/EEA (European Economic Area)/Swiss employees to apply for the, available here. Employers can provide assistance to their staff and signpost the necessary guidance using the Home Office’s Employer’s toolkit, available here.

What’s new?

The Government has published more information on what will happen if there is a no-deal Brexit:

  1. a new Home Office policy paper on post-Brexit EU migration (available here)
  2. new Home Office guidance on right to work checks, available here
  3. a new checker tool (available here) as part of its public information campaign, “Get Ready for Brexit” to prepare the public and business owners for Brexit (see here).

New Policy Paper: No-deal

This sets aside the previous policy that was announced by the Home Office in late August, which inferred that there would be an end to freedom of movement immediately after Brexit.

The new Home Office policy paper says that in the event of a no-deal, EU citizens and their families who are living in the UK before exit day (currently 31 October 2019) will have until 31 December 2020 to apply for settled status.

Those arriving after exit day will have until the same date to apply for European Temporary Leave to Remain (Euro TLR), which will give them the right to live and work in the UK for three years.

EU citizens and family members who hold Euro TLR can use this status as a “bridge into the new immigration system”. Someone with Euro TLR would still need to meet the criteria for leave to remain under the future system. This means that holding Euro TLR may not be enough to secure the right to stay once the three years expire. Those who do not apply for Euro TLR (or status under the future immigration system) will be required to leave the UK by 31 December 2020.

This means that, at least until 31 December 2020, EU citizens and their eligible family members can enter and reside in the UK after Brexit without the requirement to apply for any immigration status at all.

From 1 January 2021, those without pre-settled/settled status or Euro TLR will need to apply for a visa under the new immigration system to be able to stay in the UK legally.  This is likely to be a “points-based immigration system” covering both EEA and non-EEA nationals. The Government has commissioned the independent Migration Advisory Committee (MAC) to consider salary thresholds as well as conduct a review of the Australian immigration system and similar systems to make recommendations for the new immigration system. The MAC has been asked to report in January 2020.

New Guidance on Right to Work Checks: No-deal

The new Home Office guidance confirms that in the event of a no-deal, right to work checks will remain unchanged until 31 December 2020.  All EU citizens will continue to be able to show their passports or national ID cards.

Those with pre-settled/settled status or Euro TLR can choose to use the online checking service, although employers cannot require them to do so.

Non-EU family members will continue to be able to use their Biometric Residence Cards (BRCs). Under current rules, those with BRCs can use either manual or online checks. Non-EU family with pre-settled or settled status can also use online checks on that basis.

 

E-Signatures

Although not quite as important as Brexit (!), you maybe interested to know that the Law Commission has confirmed electronic signatures (e-signatures) are valid and can be used to execute documents.  This includes when there is a statutory requirement for a signature. The Commission’s view is based upon both legislation and court decisions relating to non-electronic and e-signatures.

Alongside recommendations relating to the practicalities of e-signatures, the Commission has also set out an option for reform, in which the law of e-signatures would be codified, as this would increase the accessibility of the law. See here for further detail.

Case update (2): Discrimination – Knowledge of Disability

Summary:  Can an employer have constructive knowledge of disability if, although it did not make sufficient enquiries into the employee’s health, the employee would not have answered such enquiries (truthfully) anyway?

No, says the EAT in A Limited -v- Z, available here.

Facts:   Z, the employee, (anonymous because of the sensitive nature of her disability), was employed by A Ltd, a small (15 employees) organisation.  Z was a part-time finance co-ordinator, but was dismissed after 14 months, having had 85 days of unscheduled absence of which 52 were recorded as sick leave. Her sickness absences were attributed to various physical ailments, when in fact they were due to her mental health conditions. Z had not disclosed her various mental and psychiatric impairments, namely stress, depression, low mood and schizophrenia, to her employer at the outset of her employment.

Following her dismissal, Z brought a Tribunal claim for disability discrimination. It was accepted at the outset that she was disabled in view of her medical history, but her employer defended the claim on the basis that it did not know, and could not reasonably have been expected to know, that Z had a disability.

The Tribunal upheld Z’s claim.  The Tribunal found that although A Ltd did not know that Z suffered from any mental illness or impairment, it had constructive knowledge of her disability. GP certificates and a hospital certificate submitted prior to her dismissal evidenced a significant deterioration in Z’s mental state and the Tribunal held that A Ltd should have enquired into her mental wellbeing.  It further held that A Ltd could not objectively justify the decision to terminate Z’s employment.

A Ltd appealed to the EAT.

The EAT upheld the A Ltd’s appeal on the grounds that it could not reasonably have known of Z’s disability. The EAT held that although A Ltd could have reasonably been expected to do more to find out about Z’s state of health, it could not reasonably have been expected to know of Z’s disability. This was because the Tribunal had found on the facts that even if A Ltd had enquired further about Z’s mental wellbeing, Z would have continued to suppress information about her mental health problems and would have resisted any Occupational Health referral or other medical examination.

The EAT also helpfully set out the agreed legal principles where knowledge of disability is concerned:

  • there needs only be actual or constructive knowledge of the disability itself; not the causal link between the disability and its consequent effects which led to the unfavourable treatment;
  • an employer must be able to show that it was unreasonable for it to be expected to know that a person suffered an impairment to his physical or mental health, or that that impairment had a substantial and long- term effect;
  • the question of reasonableness is one of fact and evaluation, but such assessments must be adequately and coherently reasoned and must take into account all relevant factors (but not those which are irrelevant).
  • when assessing the question of constructive knowledge, the information provided by the employee about the cause of absence or disability-related symptoms can be of importance because:
    • in asking whether the employee has suffered substantial adverse effect, a reaction to life events may fall short of the definition of disability, and
    • without knowing the likely cause of a given impairment, it becomes much more difficult to know whether it may well last for more than twelve months.
  • employers should consider the Employment Statutory Code of Practice, specifically paragraphs 5.14 and 5.15.
  • ‘Reasonableness’ in these circumstances is assessed by balancing between the constraints of making enquiries, the likelihood of such enquiries yielding results, and the dignity and privacy of the employee.
  • an employer does not have to make every enquiry where there is little or no basis for doing so.

Implications:   It is important to note that the EAT (and the Tribunal) both agreed that the employer should have made further enquiries of its employee’s health and the cause of her absence.

In this case it was lucky for the employer that the Tribunal had found that any such further enquiries would not have elicited any further information about this particular individual’s mental health issues. The employer was saved by the extreme lengths its employee went to in order to conceal her mental health condition.  However, this is likely to be a relatively rare outcome in practice, and employers should be alert to the need to make further enquiries about an individual’s mental health if there is any suggestion that it might be compromised.

Case update (1): Disability Discrimination – is it Long-Term?

Summary:  At what point should an assessment be made of whether an employee’s disability is long-term?

The EAT says at the time of the alleged discriminatory act.  The question is whether the impairment is ‘likely’ to last for twelve months (or ‘likely’ to recur). (Parnaby v Leicester City Council, available here).

Background:  An employee will be disabled, under the Equality Act 2010, if they have a mental or physical impairment and that impairment has a substantial and long term adverse effect on their ability to carry out normal day to day activities.  An impairment is likely to be viewed as ‘long-term’ if it has lasted for at least 12 months, is likely to last for at least 12 months or it is likely to last for the rest of the person’s life.  If the impairment ceases to have a substantial adverse effect at any point, it will be treated as continuing to have the effect if the effect is likely to recur.

Facts:  Mr Parnaby, the employee, was dismissed in July 2017 for capability because of his long-term sickness absence. Mr Parnaby had suffered with work related stress on two occasions, from 15 April to 31 May 2016 and from January to June 2017. His GP records referred to his suffering from a depressive disorder and that he had been prescribed antidepressant medication, on an intermittent basis since May 2016 and continuously from June 2017.

Mr Parnaby brought Tribunal claims for unfair dismissal and disability discrimination, both on the grounds of his dismissal and acts prior to this (including an OH referral, application of the employer’s absence management procedure and failure to make reasonable adjustments).  It was accepted that Mr Parnaby’s depressive disorder could fall within the definition of disability, but the question was whether it met the criteria of ‘long-term’ and a ‘substantial and adverse effect’.

At a preliminary hearing, a Tribunal found that Mr Parnaby’s condition did not meet the definition of disability, as the break between his two periods of absence from work were distinct and had not lasted for at least twelve months.  This meant that the time of the act of discrimination, his dismissal, the impairment had not lasted for twelve months. This meant the adverse effect of his condition was not long-term. In particular, the Tribunal held that the second period of absence was a reaction to workplace difficulties which did not affect him when he was not at work.

Mr Parnaby appealed.

The EAT allowed the appeal. The EAT said that the Tribunal should not have assumed that the likely future duration of the impairment (at the time of dismissal) would be time limited by the employee’s dismissal, which would then remove the source of the impairment (i.e. the stress of work that caused the depression). That was the wrong analysis. The dismissal came after many of the acts he complained of and, as such, his dismissal should not have been considered.

The EAT said that the question was whether the impairment was ‘likely’ to last for twelve months (or ‘likely’ to recur) and, importantly, that this should be assessed at the time of each of the acts in question. The test to assess recurrence is a predictive one; to consider whether it ‘could well’ happen in the future. ‘Could well’ happen means ‘more probable than not’.

Implications:  This case highlights the importance of assessing all elements of the test for disability at the time of each alleged discriminatory act.  Also, it is important to ensure that all the circumstances are considered in determining whether the impairment is likely to last for more than twelve months and/or likely to recur in the future.

Case update (3): Whistleblowing – What is in the Public Interest?

Summary: For a disclosure to be ‘in the public interest’, is it enough that the employee has a reasonable belief that this is the case?

Yes, held the EAT in Okwu v Rise Community Action available here.

Facts:  Ms Okwu was a new starter with Rise – a small charitable organisation – supporting individuals affected by domestic violence, FGM and HIV. She had what was described as a long and varied experience of social work and was expected to make early progress to support service users and help to promote the service.  However, unfortunately Rise were not convinced by Miss Okwu’s early performance and extended her probationary period for a further three months. Shortly after this, Ms Okwu raised some concerns with Rise, which included a ‘disclosure’ that they were acting in breach of the Data Protection Act (DPA) by failing to provide her with a work mobile and secure storage, given she was dealing with sensitive personal data.

Rise took the view that Ms Okwu had made a number of unfounded allegations and decided to dismiss her. The letter referred to her poor performance and conduct (which it had raised with her as part of her performance reviews). It then went on to say that its decision was ‘compounded by [her letter] which … demonstrated your contempt for the charity, its work and its client group.’

Ms Okwu brought a Tribunal claim on the basis that she had been unfairly dismissed for making protected disclosures.

The Tribunal rejected Ms Okwu’s claims and found that the matters she raised concerned only her own position and were not in the public interest.

Ms Okwu appealed to the EAT.  The EAT upheld Ms Okwu’s appeal and found that the Tribunal had misapplied the public interest test. The key question isn’t whether the issues raised were in the public interest, but whether Ms Okwu reasonably believed them to be in the public interest.  It found that the matters raised by Miss Okwu clearly referred to breaches of obligations under the DPA and so it was difficult to understand how she could not have a reasonable belief that her disclosures were in the public interest.

Implications: This case highlights the importance for employers to consider carefully whether a complaint made by an employee could amount to a protected disclosure, taking into account the mindset of the employee making the disclosure

Employees only have to show they have a reasonable belief that their allegations are in the public interest. This is unlikely to be much of a challenge for employees.  Therefore, unless you can prove that an employee has deliberately lied, it’s best to take steps to investigate their concerns.

September 2019 Newsletter

Now that the summer is a distant memory and we’re all firmly ‘back to school’, it is normally to be expected that Parliament gets back to passing legislation including employment law.  However, we all know that the words ‘normal’ and ‘Parliament’ are not going to sit well together at the moment.  While we watch with alarm the goings-on in Westminster, we can at least update you on the latest Government no-deal policy for immigration and right-to-work checks.  We also update you on the Law Commission’s sign-off on e-signatures and in our case update this month we focus on disability discrimination and what it takes (or does not take) for a whistle blowing disclosure to be in the public interest.

What we’ve been doing recently…

As lawyers, the last few days have often left us often open mouthed what’s been going on in Parliament and in the courts.  The Supreme Court’s recent judgment on the proroguing of Parliament is, in legal history terms, simply dynamite, and probably the most significant judgment of any court in the land in several hundred years.  Meanwhile, it feels impossible to comment in a way that doesn’t sound partisan on the fact that the UK Government is openly and repeatedly insisting that it will not obey the law.

Luckily, we have lots of work supporting our clients to keep us busy and distracted from the constitutional crisis.  We continue to be very busy with mental health dismissals and Tribunal claims, as well as enjoying our gearing up for our next Employment Law Update event on 8 October.

Last chance to book!

Menzies Law Employment Law Update – with an afternoon session on Pregnancy & Maternity in the Workplace

Tuesday 8 October 2019

Morning: our usual Employment Law Update format, sharing our knowledge on a range of current employment law topics, including a focus on IR35 featuring a Tax specialist as a special guest to complement our legal experts.

Afternoon: a deep dive into the hot topic of pregnancy and maternity in the workplace, focused on knowing the law, reducing your legal risk and retaining your women returners.

BOOK NOW!

A roundup of this month’s news:  

 

Blog: IR35 reforms – the top 10 most irksome aspects (part 2)

If you found my first blog on the IR35 reforms helpful, let me share with you contenders 4, 5 and 6 in my ‘most irksome’ list.

Number 4 most irksome

At number 4 is the fact that when assessing the IR35 question for any contractor you have to work out the ‘hypothetical’ contract that could be said to exist between the consultant, their PSC and your own business. That involves reviewing the terms of your contact with the consultant’s PSC and also the PSC’s contract with the consultant. If the latter does not exist (which is often the case) then you have to interview the consultant to find out what the deal is between him or her and their PSC.

As a starting point, they may have little clue what you are on about! I’m not sure how many contractors with a PSC really appreciate what the set-up is and what their relationship is with their PSC. Are they just a shareholder and director or are they an employee too? Are they paid just in share dividends or in salary too? What about pension and any other benefits?

Only after you have all this information can you put it together with the terms of the agreement between your business and the PSC and form an overview of the whole picture to help you answer the main question, which is ‘Would this contractor really be our employee, but for the existence of their PSC?’

Number 5 – devilishly complicated

At number 5 is the fact that your assessment of what the terms of this ‘hypothetical’ contract may be will become a really complicated exercise if, as is sometimes the case, there may be an agency sitting in the contractual chain between your business and the PSC. (In fact, sometimes there are even more businesses in the chain.)

If this is the case you then need to assess your contract with the agency, the agency’s contract with the the PSC and also the PSC’s contract with the consultant. All of them need to be brought together to ascertain the overall situation. This is where it can get very complicated indeed.

Number 6 – very unhelpful

At number 6 I will offer up the fact that if you find that your business’s contract with the PSC has any of the following terms in it, then the contractor is almost guaranteed to be seen in law as your employee:

  • holiday pay
  • needing to ask your permission before taking holiday
  • sick pay
  • needing to comply with any absence management policy (beyond the mere fact of telling you they are sick)
  • any form of pension payment
  • any form of private healthcare provision or other insurance cover

(You may think it’s obvious that these sorts of terms shouldn’t be present in a self-employed contractor agreement, but you’d be amazed at what we’ve seen over the years…)

The remaining top 10…

If you can bear any more, I will share the remainder of my top 10 in a future blog. I’m confident you can’t wait.

If you’re facing the pain of the IR35 reforms and could do with some advice, support, a sounding board, a fresh pair of eyes or simply a hug, do please get in touch with me.  

Luke Menzies
Director

Email Luke or call 0117 325 0921

Government Reforms (2):  Good Work Plan – One-Sided Flexibility 

What do we already know?

The Taylor Review of Modern Working Practices (‘the Taylor Review’), made detailed recommendations for reform of UK employment law.  For further detail on the background of this Review please see our updates here.

The Government’s response to the Taylor Review was the ‘Good Work’ plan in which it sets out its plans on taking forward the Taylor Review proposals.  For further detail on this response please see our February 2018 Newsletter Government reforms (2): Employment status – Government response to the Taylor review.

What’s new?

The Government has published a further Consultation as part of its Good Work Plan.

Good Work Plan: Consultation on measures to address one-sided flexibility (available here) proposes to introduce new rights for workers to be given reasonable notice of their working hours and to be compensated where their shifts are cancelled or curtailed without reasonable notice.

Views are sought on whether the new rights should be “day-one” rights, what “reasonable notice” should be in respect of both rights, the level of compensation, and whether rights should vary depending on type of work done or the industry in which the worker is employed. The consultation document also notes that the Government has previously committed to adopt the Low Pay Commission’s recommendation for workers to have a right to switch to a contract that reflects their normal working hours, with limited grounds on which an employer is entitled to refuse.

The Consultation closes on 11 October 2019.

 

 

Case Update (3): Immigration – Illegal Working and Tribunal Claims

Summary: Can an employer rely on a breach of the immigration rules to argue that an employment contract is unenforceable in claims by employees?

No held the Court of Appeal in Okedina v Chikale available here.

Facts: Miss Chikale was a Malawi national who was initially employed by Mrs Okedina in Malawi in 2010. Miss Chikale came to the UK in 2013 as a domestic worker and was given a right to remain for 6 months. There was an employment contract in place from 2010 but, in conjunction with her immigration application in 2013, there was then a new employment contract which was for an indefinite term, but terminable on 6 weeks’ notice.

Miss Chikale remained working in the UK beyond those permitted 6 months. Mrs Okedina dealt with Miss Chikale’s immigration application and applied for her to remain in the UK as a family member.  However, this application failed.  Mrs Okedina did not tell Miss Chikale this information and she continued working. There were then issues around her rate of pay and Miss Chikale asked for an increase.   Miss Chikale was summarily dismissed in August 2015.  As a result, she brought claims again st Mrs Okedina for arrears of pay, unfair dismissal and race discrimination.

Mrs Okedina argued that Miss Chikale could not bring her claims as her contract of employment was unenforceable because it was performed in circumstances where the employee did not have the right to work in the UK.

The Tribunal disagreed with that argument and upheld Miss Chikale’s claims.

Mrs Okedina appealed to the EAT on the basis that, as the contract was prohibited by immigration rules, it was unlawful from the outset and incapable of being enforced in law.

The EAT decided that the 2010 contract was legal when it was entered into. Even if there had been a new contract in 2013, that was not illegal at the outset, as Miss Chikale had a right to work in the UK at the time it was entered into, and the contract could be terminated by giving notice. It was therefore not an illegal at the outset.

The EAT considered the effect of illegality on a contract of employment. It noted that there were two types of illegality which render a contract unenforceable from the outset: (i) where the contract is entered into with the intention of committing an illegal act; and (ii) where the contract is expressly prohibited by statute.

Neither of these situations were applicable to this case. However, there was a third category of case where a party may be prevented from enforcing a contract; which is where the contract is lawful when it was made, but later becomes illegal and the party who later seeks to sue on it knowingly participates in the (later) illegal performance of that contract.

The EAT was satisfied that Miss Chikale was not involved in the illegal performance of the contract and was therefore able to rely upon the contract and bring her claims.

Mrs Okedina appealed to the Court of Appeal but the Court of Appeal upheld the EAT’s decision.

The Court of Appeal held that Immigration Asylum and Nationality Act 2006 was not intended to be directed at those working illegally, which would prevent them having a remedy for unfair treatment.  Rather, the purpose of the Act was to impose penalties on those who employed illegal workers.

As Miss Chikale had not knowingly participated in any illegality, there was no reason to deny her a remedy in the Tribunal.

Implications: This case is important, since it re-emphasises the fact that an employer will not be able to avoid liability on a contract which is performed illegally by the employer, if the employee is not complicit in those acts. It also means that employees in similar situations will be able to bring discrimination and other claims against an employer, even if the contact is being performed illegally.

Case Update (2):  Happy Holidays! Pay for Term-Time Workers

What do we already know?

We updated you in our March 2018 Newsletter Case update (2): Happy holidays! Pay for term-time workers that the EAT had decided in Brazel v The Harpur Trust that holiday pay for staff who work irregular hours should be calculated using the standard 12-week reference period required under the Working Time Regulations (WTR), rather than on the basis of 12.07% of annual pay.

The employer appealed to the Court of Appeal.

What’s new?

The Court of Appeal has upheld the EAT’s decision that holiday pay should not be calculated on the basis of 12.07% of hours worked for permanent staff with irregular hours, but instead should be based on an average of earnings in the 12 weeks before leave is taken.

In the Court of Appeal’s judgment in Brazel v The Harpur Trust, available here, the Court rules that the common practice of applying a cap of 12.07% of annualised hours, as suggested by ACAS, is incorrect.

Background:  Under the WTR, workers are entitled to 5.6 weeks’ paid holiday. This right comes from the EU Working Time Directive, which provides for a minimum of four weeks’ paid annual leave. Under the WTR, workers who work irregular hours (such as casual, bank or zero hours workers) should be paid holiday pay calculated by reference to the average pay over the previous 12 weeks before the calculation date (which is the first day of the relevant period of leave) excluding any weeks in which no remuneration is payable. This is to be increased to 52 weeks from 6 April 2020.

The ACAS booklet “Holidays and holiday pay” (available here) recommends that for staff working on a casual basis or very irregular hours, holiday pay should be calculated as 12.07% of annualised hours, on the basis that the statutory annual leave entitlement of 5.6 weeks represents 12.07% of a working year of 46.4 weeks (i.e. 52 weeks minus 5.6 weeks). This method effectively caps a worker’s holiday pay to 12.07% of annual earnings with the effect of pro-rating holiday pay entitlement for “part-year” workers (such as term-time only workers).

Facts:   Mrs Brazel was a part-time music teacher, retained on a zero-hours contract. She worked mostly during term-time and her hours fluctuated weekly. She had a contractual right to 5.6 weeks’ paid holiday, mirroring her statutory right, and she was required to take this holiday during school holidays.

Mrs Brazel was paid holiday pay based on 12.07% of the actual hours worked each term at the end of the term.  She received holiday pay three times a year in her March, August and December pay packets. This approach was based on the ACAS guidance on holidays and holiday pay for casual workers and avoided a “windfall” for term-time workers as their non-working weeks would be taken into account and their holiday pay pro-rated.  However, it did not follow the methodology used by the WTR i.e. calculating holiday pay based on her average rate of pay over the 12 weeks prior to holiday being taken.

Ms Brazel argued that she lost out with this method of calculation as it produced a lower figure than that required by the rules in the WTR. She believed that holiday pay should be calculated by taking the average weekly remuneration for the 12 weeks prior to the calculation date and multiplying it by 5.6. She calculated that this would give her holiday pay of around 17.5% of her earnings for the term and brought a Tribunal claim on this basis.

The Employment Tribunal rejected Ms Brazel’s claim and agreed with her employer that a part-time worker who works for only part of the year should have their holiday entitlement pro-rated to reflect the weeks they actually work. Otherwise, a term-time worker could receive a higher percentage of annual earnings as holiday pay than an employee who worked throughout the year. This would be unfair to full-time workers.

Mrs Brazel appealed to the EAT, which overturned the Tribunal’s decision on the basis that it does not comply with the methods required by the WTR.  The EAT instead held that holiday pay should be calculated by using the 12-week averaging method which applies under the WTR where workers have no normal working hours.

The EAT did not consider there to be a requirement to pro-rate the leave entitlement of part-time employees, whether to avoid a “windfall” for term-time only workers or to avoid full-time employees being treated less favourably than part-timers.

The employer appealed to the Court of Appeal, which upheld the EAT’s decision.  Whilst stating “it may at first sight seem surprising that the holiday pay to which part-year workers are entitled represents a higher proportion of their annual earnings than in the case of full-year workers”, the Court of Appeal went on to say that it was not persuaded that this was unprincipled or obviously unfair. It said that the WTR make no provision for pro-rating and simply require the straight-forward exercise of calculating a week’s holiday pay by averaging the last 12 weeks’ pay. In terms of holiday entitlement itself, the Court of Appeal said that while ECJ case law did appear to establish that workers should only accrue holiday entitlement in proportion to the time that they work, this approach was not mandatory and, as member states are able to provide more favourable entitlements, there was no requirement to pro-rate the entitlement of part-year workers to that of full-year workers.

Implications:  When calculating holiday pay for employees who do not have regular hours of work, whether they are term-time workers or any other irregular working pattern, the correct approach is to work out the average pay in the 12 week period prior to the holiday being taken (only including weeks when an individual is working and ignoring weeks when the worker is on holiday or on unpaid leave).

Note that from April 2020, the appropriate reference period will be 52 weeks.

In light of this judgment, employers who have historically pro-rated the holiday entitlement and pay of workers who do not have normal working hours (e.g. because they do not work throughout the year) should now take steps to review their current calculations and determine whether adjustments might now be appropriate.

Unfortunately, simply paying 12.07% annualised hours as holiday, or increasing hourly rates by 12.07%, to include an element for holiday pay (‘rolled up holiday pay’) may produce the wrong result for employees and may leave you vulnerable to claims for unlawful deductions from wages.

The good news is that the decision should only affect employees engaged under permanent contracts who work for part of the year (including term-time only workers, seasonal workers and those on zero hour contracts).  The decision does not directly comment on zero hours (or other casual staff) who are not retained by their employer between periods of work.

It remains to be seen whether this case will be appealed to the Supreme Court.  It is probably not going to be seen as important enough, but we will of course update you if it does happen.

Holiday pay remains a complex area and if you have any holiday pay concerns please do please do email us at or call 0117 325 0526.