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Employment Tribunals get tough on holiday pay claims

The Scottish Tribunals recently announced that they have 21,000 outstanding holiday pay claims dealing with overtime, commission and allowances. We don’t have figures for England and Wales but our own experience suggests that employees are becoming increasingly confident about alleging that they have been underpaid holiday pay and many are joining together to bring claims.

Many have done so in the expectation that their claims will be automatically stayed (without them having to take any steps to prove that they have been underpaid) until test cases are determined. Our experience indicates that Tribunals are now starting to take a more robust approach to managing these cases and to put pressure on Claimants to specify: 

a) why they believe they have been underpaid; and
b) to set out details of the alleged underpayments by reference to when holiday was taken and the amounts paid.

The approach taken by the Scottish Tribunals and those in England and Wales is slightly different, but there are some consistent themes.

It is for the Claimant to prove their case. A claim form which merely alleges that the worker has been underpaid will not be sufficient.

Common directions require the Claimant to set out:

  1. the particular form or forms of payment in addition to basic pay relied upon (for example, shift premium, overtime, bonus etc);
  2. the circumstances in which the Claimant receives the identified form of payment (for example, habitually, usually, occasionally, in accordance with a rostered cycle etc);
  3. the material holiday year;
  4. the Claimant’s position as to the days of holiday which should reflect payments in excess of the basic rate of pay (i.e. the first 20 days/all paid holiday etc);
  5. in circumstances where there are a number of claims brought against the same employer, whether the Claimant is to be treated as a lead Claimant nominated by all the Claimants.

This means that Claimants cannot expect employers to do all of the work for them in preparing their case. This is helpful. We have seen speculative approaches (particularly by non-recognised unions) for information about employers’ holiday pay policies in the hope that this information can be used to make cases against them.

Employers do not have to provide this information and, to the extent that issues are raised by individual workers, employers may wish to consider asking them to demonstrate when they claim to have been underpaid and the reasons supporting this.   

In the context of litigation, once this information is provided, many cases are then being stayed. In Scotland, the Employment Tribunals have said however that they will identify lead cases which give rise to common or related issues of fact which can be heard and, ultimately appealed, in order that these guidelines can then be applied to the stayed cases. 

It is likely to take months, if not longer, for all of the outstanding issues about what should be included in holiday pay to be determined.   

In the meantime, businesses can be robust about deflecting commission and bonus claims, but should carefully consider whether to amend their holiday pay structures to take into account all types of regularly worked overtime (either at regular times of the year or worked frequently), because the direction of travel suggests that the distinction between the ‘type’ of overtime worked (guaranteed, non-guaranteed or voluntary) is much less important than how regularly/frequently it is worked.

We have developed a number of strategies to help businesses determine and reduce their potential liabilities for underpaid holiday. Please contact me if you would like to discuss these.

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Glenn Hayes