November 2022

The Harpur Trust vs Lesley Brazel is an important case to consider in developing any company and recruiting staff members. In this case, the Supreme Court was asked to consider two different methods of working out holiday pay. One favoured workers, while the other was closer to the method found in the EU case law. In this article, ClouDoc offers an overview of what was involved in the case, the court’s decisions, and how this can impact your business. 

Case Law Update: Paid Holiday Entitlement

The Supreme Court has upheld the Court of Appeal’s judgement on the Harpur Trust vs Brazel case.

The ruling states that holiday pay for permanent staff who only work part of the year, such as term-time workers, should receive a full 5.6 weeks of annual leave a year. Pay should be calculated over a 52-week average rather than based on 12.07%. The same principles apply to those on zero-hours, variable-hours, or casual contracts.

Relevant Employment Law

Article 7 of the EU’s Working Time Directive (WTD) outlines that member states’ workers should be provided at least four weeks of paid annual leave in one year. In Great Britain, the Working Time Regulations 1998 (WTR) provide workers with a minimum of 5.6 weeks of paid annual leave. These regulations dictate that workers should be paid at the rate of a week’s pay for each week of leave.

If workers do not have normal working hours, section 224 of the Employment Rights Act (ERA) outlines that a week’s pay should be determined by averaging their weekly pay over the previous 12 weeks. For the purpose of holiday pay, the WTR says to instead use 52 weeks as opposed to 12.

Acas previously advised that workers in this scenario should accrue paid holiday entitlement at a rate of 12.07 per cent of hours worked. This figure was calculated by taking 5.6 weeks away from 52 weeks to find the standard working year of 46.4 weeks. 5.6 weeks is 12.07 per cent of 46.4 weeks.

This has now been updated, and new guidance in 2020 was issued by the Department for Business Energy and Industrial Strategy. This instructs employers not to:

• Include in the holiday reference period any whole week in which no payment was received, and
• Apply the Percentage Method (i.e. 12.07%)

Harpur Trust v Brazel

The claimant, in this case, operated as a music school teacher. As part of a zero-hours part-year contract, she worked at a school regularly and was only paid for her work. Generally, she worked for around 32 hours per week. The school year provided more holidays than the statutory minimum. As a result, her paid holiday entitlements were calculated by:

• Assessing her earnings at the end of each of the three school terms,
• Working out one-third of 12.07% of that figure.

The school believed that this was in keeping with guidance from Acas. The claimant argued that this system did not comply with the provisions of the WTR and that they didn’t provide her with the holiday pay she was entitled to.

What the Employment Tribunal (ET) Found

The claimant brought a claim to the ET for unlawful deductions from wages. The tribunal dismissed her claim as they had found that the school had calculated her holiday pay correctly by applying the pro-rating principle.

What the Employment Appeal Tribunal (EAT) Found

The claimant appealed to the Employment Appeal Tribunal (EAT), which ruled in her favour. They found that section 224 provided a simple method of calculating pay for irregular workers. In determining their decision, the EAT held that part-time workers could not be treated any less favourably than full-time workers. However, they found that the WTR did not provide any requirement for pro-rata holiday pay for part-time employees, even if it was to ensure that full-time employees were not treated any less favourably.

What the Court of Appeal Found

The organisation appealed to the Court of Appeal. They argued that reducing the claimant’s holiday entitlement was necessary to avoid unjust results. For example, if the employee in question was provided holiday pay at 17.5%, it would result in other zero-hour contract workers being entitled to significant holiday pay. In some cases, the holiday pay would exceed that of full-time staff.

The Court of Appeal dismissed this appeal. They first identified the claimant as someone who did not work throughout the year. Therefore, they were a ‘part-year worker’. They continued to outline that the WTD only requires workers to accrue annual leave in proportion to their work time. The Court labelled this an ‘accrual approach’. However, this does not apply to the remuneration for that leave. And so, the WTD places no requirement on member states to pro rata leave entitlements of ‘part-year workers’ to that of ‘full-year workers’.

Regarding domestic law, the Court acknowledged that the ruling might seem surprising. However, the fact that part-year worker holiday pay could represent a higher proportion of their annual earnings than full-year workers was not ‘unprincipled or obviously unfair’. The important factor to consider is that part-year workers are on permanent contracts. Therefore, treating that as a sufficient basis for fixing the quantum of holiday entitlement wasn’t unreasonable.

The Court did accept that this ruling could lead to off results in ‘extreme cases’. Overall, it concluded that it would be unusual for an individual who only worked a few hours a year to be on a permanent contract.

The Supreme Court (SC) Ruling

The Supreme Court has upheld the Court of Appeal’s judgement in this matter. They rejected the methods proposed by the employer. They held that a method is already established in the Employment Rights Act for calculating a week’s pay. Using other methods was not in line with parliamentary policy.

This was based on the absence in the WTR of a method to calculate pro-rata leave for those still employed but not required to work every week of the year. As the SC pointed out, parliament included a method to work every week of the year. As the SC pointed out, parliament included a method to calculate pro-rata leave when an employee begins or ends their employment during an annual leave year. The omission of a means to do this for those working on part-year ongoing agreements was clearly deliberate. The judgement concludes, summing up the findings as follows:

“In short, the amount of leave to which a part-year worker under a permanent contract is entitled is not required by EU law to be, and under domestic law is not, prorated to that of a full-time worker.”

Why is this important to your Business?

The Harpur Trust v Brazel case is important for employers calculating holiday pay for atypical workers. The key takeaway from this judgment is that all workers should be getting 5.6 weeks’ leave, regardless of how many weeks in the year they work. What is crucial is:

• That their contract is ongoing
• That they are not required to work every week of the year,
• That their holiday pay should be based on an average over 52 weeks in which they have performed work.

This means employers will need to ensure they keep accurate records to be able to calculate this average. It is especially important to note that only the weeks in which work is performed should be included. Weeks where no work is provided, but the contract continues, should not be included. This may mean going further back than one year (to a maximum of 104 weeks).

Moving forwards, employers may need to register their use of permanent zero-hours contracts. Consider whether other types of contract of working arrangement are more suitable, such as fixed-term working or providing more regular work. 

For more information on our policies and procedures and how we can support you here at ClouDoc, call our team today on 0330 808 0050!