Mention of the ‘Harpur Trust v Brazel’ decision is likely to elicit much head scratching from most HR managers. Now this case has hit the headlines in another way – a government consultation as to its impact; Emma O’Connor Director and Gemma Nelis, Trainee report…
The 2022 landmark case of Harpur Trust v Brazel concerned part-year workers’ entitlement to holiday and holiday pay. Its effect? Permanent part-year workers are entitled to proportionally more holiday than part-time workers who work the same number of hours across the year. Since the Supreme Court handed down its decision in July last year, employers and solicitors alike have awaited much-needed clarification. Evidently such concerns have gained the Government’s attention, as it recently issued a consultation paper proposing new legislation to address the ambiguity caused by this case.
Ms Brazel was employed as a music teacher at the Bedford Girls School by The Harpur Trust on a permanent, zero-hours contract. She worked between 10 and 15 hours a week for 32 weeks of the year. As such, her pay varied weekly. The Supreme Court, in ruling in Ms Brazel’s favour, found that she, like all other workers, was entitled to 5.6 weeks’ paid holiday a year in accordance with the Working Time Regulations 1998 (the “Regulations”). The controversy, however, surrounds the Court’s calculation of holiday pay in such circumstances – in the absence of a clear approach in the Regulations. The Court held that workers must be paid their average weekly pay over the previous 52 weeks in which salary was payable. Crucially, however, in calculating such pay, weeks that workers do not work, and hence, are not paid, should be ignored.
For further detail on the case itself, please see our previous blog post here.
A study has found that 88% of employers ‘don’t fully understand’ how the judgment could impact their business. No wonder – it has been common practice, such practice even being previously endorsed by ACAS, to calculate part-year workers’ holiday entitlement on a prorate basis, using what is termed the ‘12.07% method’. In essence, the Court held that although such method was appropriate for other types of workers, it was not permitted by the Regulations to use for part-year workers. Instead, employers should revert to the Court’s guidance, as set out above.
Even the Supreme Court acknowledged that their method could produce excessive results, generating a category of part-year workers who would receive proportionally greater holiday entitlement than full- and part- time permanent employees. Such impact is amplified by the Government’s estimate that as many as 500,000 part-year and zero-hours contract workers and 200,000 agency workers could fall into this category. Thus, representing significant cost implications for many employers, especially those in the retail, hospitality and education sectors - let alone a headache for employers who have to interpret complex case law when calculating holiday pay for each worker.
The Government’s consultation represents a step in the right direction to rectify such concerns. Although the Government recognises the reasoning behind the Supreme Court’s interpretation of the Regulations, it acknowledges that such interpretation does not reflect the intention of the legislation. This is unsurprising given that zero-hour contracts were not as common in 1998 as they are now.
The Government seeks to introduce legislation to clarify that when calculating holiday pay, the 52-week reference period should include those weeks in which no work is performed. Such amendment appears necessary to meet the Government’s aim of ensuring that workers’ holiday pay and entitlement is proportionate to the number of hours they work in the year. The Government seeks employers’ views on this proposed legislation and even provides worked examples illustrating how the legislation would operate in practice (Warning - these are not for the faint-hearted!).
Given that the Supreme Court’s guidance took effect on the date of the judgment, employers need to be mindful that, at present, this guidance represents the current law. Nevertheless, it is likely that many employers will assume a ‘wait and see approach’ to the Government’s response to determine whether any new legislation is on the horizon. Although litigation does not appear to be in employees’ commercial interests in these circumstances, the risk of litigation is no doubt greater in those industries where permanent part-year and zero-hours contracts are more common.
For more information about how the Harpur Trust v Brazel decision could impact your business then please contact us on [email protected].
Call to Action
Get involved in the debate and consultation – if this decision impacts your business, then make your representations known. We are also looking at representing businesses who wish to put forward a collective response.
Consistent with our policy when giving comment and advice on a non-specific basis, we cannot assume legal responsibility for the accuracy of any particular statement. In the case of specific problems we recommend that professional advice be sought.