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Clarification on calculating annual leave for term-time workers

The Supreme Court decision in the case of Harpur Trust v Brazel has finally been published. This is the long-awaited case which looked at whether employees who are permanently employed, but only work part of a year, should receive the full 5.6 weeks of leave, or a reduced pro-rated amount.

Background facts
Mrs Brazel is a visiting music teacher at a school in Bedford run by Harpur Trust. She has worked on a permanent contract since 2002 and works irregular hours during term time for which she is paid accordingly. During school holidays, she was not required to work at all meaning that essentially, she was a part-year worker.

Her contract set out that she was entitled to 5.6 weeks’ paid leave per annual leave year, but the Trust changed the way it worked out her leave. Before September 2011, Mrs Brazel was treated as taking her annual leave in three equal chunks - in the winter, spring and summer school holidays. As a result, 1.87 weeks of each school holiday was treated as annual leave for which Mrs Brazel was entitled to be paid. In accordance with s224 Employment Rights Act, Mrs Brazel’s annual leave was calculated by taking her average pay in the twelve term-time weeks prior to the school holiday and paying her 1.87 times that weekly average.

However from September 2011, the Trust changed this and adopted the 12.07% approach to calculate Mrs Brazel’s holiday pay. The 12.07% Approach calculated annual leave entitlement on the basis that 5.6 weeks is equivalent to 12.07% of hours worked over a year (5.6 weeks’ holiday, divided by 46.4 weeks (being 52 weeks – 5.6 weeks) multiplied by 100 = 12.07%). The Trust said that the 12.07% Approach was in accordance with ACAS Guidance in force at that time. This approach is commonly used for employees who work on a zero hours or other irregular hours basis.

The Trust’s change of approach in 2011 had the effect of Ms Brazel receiving less annual leave entitlement than she had previously received. She therefore (not unsurprisingly) brought proceedings for unlawful deductions from her wages by underpayment of her entitlement to holiday pay.

The original case at the Employment Tribunal went in the Trust’s favour, but this was overturned at the Employment Appeal Court, and then taken to the Court of Appeal which again favoured Mrs Brazel. . (See for the summary after the Court of Appeal judgment). It then went to the Supreme Court for a final ruling and was heard last November with the decision published at the end of July 2022.

The issue for the Supreme Court
By the time the case came before the Supreme Court, the key issue for determination was whether a part-year worker’s leave entitlement should be pro-rated (i.e. calculated proportionally to the number of weeks actually worked) or whether their entitlement to annual leave should be calculated ignoring those weeks.

The outcome
The Supreme Court concluded that the amount of leave to which a part-year worker is entitled should not be pro-rated to that of a full-time worker and that such a worker is entitled to the full 5.6 weeks and that the 12.07% method should not be used.

The Supreme Court accepted that this approach put Mrs Brazel in a more favourable position than some full-time workers in the sense that she was entitled to a proportionately greater leave requirement than full time workers. However, this approach was permitted by EU law and required by national law.

Practical implications
Those employers who continued to calculate part-year workers’ annual leave entitlement using the 12.07% Approach, will now have to consider and revisit their practices of calculating holiday pay. Based on this judgment, these employers may face claims from affected workers in respect of underpaid holiday pay. Indeed, employers who have used this approach in the past may now face backdated claims for unpaid holiday pay for up to two years.

Alternatively, those employers who engage workers who work irregular hours on permanent contracts may want to reconsider whether to continue to use permanent contracts or whether only to employ them on fixed term contracts.
Posted on 27 Jul 2022
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