Employment Law Bulletin November 2014


You are unlikely to have been able to avoid the recent headlines announcing that workers can sue their employers for millions of pounds in holiday back-pay claims, going all the way back to the 1990s. But is this really the Euroemploymentlawdisaster that we are led to believe? As so often with such things, the answer is “mostly, no”. However, as with anything to do with the laws on holiday pay, the detail is complex, often mind-bendingly so.

In the UK, we usually calculate holiday pay based upon a worker’s basic salary – but we do not normally include overtime, commission or similar payments. However, a series of recent judgments have made it clear that the European Directive on working time requires employers to factor in overtime and commission payments – and anything else a worker would normally receive if they were working – so they are not dissuaded from taking holiday by being paid less when on holiday than when at work.

Much of the fevered commentary has, however, missed out two crucial points.

First, the higher holiday pay rate only applies to the first four weeks’ paid holiday each year (including bank holidays). The employer can continue paying basic salary for any additional annual leave (although note the rules are slightly different if the employee does not have normal working hours).

Second, employees are very unlikely to be able to bring the scary-sounding claims for huge amounts of underpaid holiday pay, going back years, as has been excitedly reported. The most recent Employment Appeals Tribunal decision makes it clear that a three month gap in holiday underpayments is enough to stop a claim going any further both in time. In practice, very few workers will have taken the right holiday at the right intervals in order to enable to sue for such historic amounts.

It is a serious and potentially costly issue from now on, though. All employers should be examining their holiday pay arrangements to ensure that they understand how they are affected and what they should do to minimise the cost exposure. As ever, we’re here to help.

Ill-health absences and disability

General Dynamics Information Technology Ltd v Carranza

It is notoriously difficult to judge when it might be right to call time on a frequently absent employee’s service. That is even more so where the employee is disabled, because of the extra layers of responsibility placed on employers to ensure fairness.

Mr Carranza suffered from stomach adhesions – a disability. His employer had made adjustments for his condition. But after being off work for 41.5 weeks in three years (mostly, but not solely, disability-related) he was given a final written warning.