Lawyers urge caution as colleges face £100,000 holiday pay ruling

Colleges are bracing themselves for six-figure bills following a landmark ruling that gives all staff equal holiday pay.

But an expert law firm is advising colleges to be cautious as the government moves forward with proposed legislation which could bypass the legal case.

Colleges across England have consulted lawyers since the Supreme Court judgment in Harpur Trust v Brazel last July, which ruled that all workers should get a minimum of 5.6 weeks of paid holiday time, regardless of how many hours they work.

The case focused on music teacher Lesley Brazel, who argued that it was unfair she got less annual paid holiday because she worked variable hours each week during term-time.

The decision to rule in favour of Brazel is significant because it means that thousands of term-time workers have been underpaid and could now bring claims going back up to two years.

Large colleges have warned that the ruling will have a “significant adverse impact”, with at least two setting aside more than £100,000 to resolve any claims.

‘Significant adverse impact’

Since the ruling, workers who feel they are owed holiday pay have been able to approach their employers to claim that money back. Colleges have been preparing for the impact.

At DN Colleges Group, legal firm Eversheds Sutherlands advised the college to “implement compliance” with the working-time directive, but said that it would be “unlikely” to need to engage in collective bargaining with trade unions.

The impact, some warn, will be severe, with East Kent College saying the ruling had a “significant adverse impact” on the group.

Following the ruling, it undertook a “full review” of staff affected and “recalculated staff pay”, letting all staff know the impact it would have on them. The college does not specify how much it paid out to staff.

Meanwhile, Brockenhurst College declared a “potential historical liability” of £150,000, while one of the biggest colleges in the country, Chichester College Group, set aside £140,000, which it says would cover two years of relevant backpay. “It is expected that a payment will be made in the year to 31 July 2023,” it said in its annual report.

FE Week understands that the Association of Colleges took legal advice from Irwin Mitchell on the impact the changes could have, but it does not have an estimate of how much the college sector could have to pay back in total.

University and College Union general secretary Jo Grady said: “For far too long employers have used underhand tactics to deny casualised workers their full holiday pay. This case is one of many brought by the union movement which confirms that, when employers play fast and loose with the law, they will be held to account.”

‘Be pragmatic’

But things have changed. In January, just months after the ruling, the government launched a consultation looking at pro-rata holiday entitlement for part-year workers.

The proposals, if accepted, would “ensure that holiday pay and entitlement is directly proportionate to the time they spend working”. The consultation closed in March and is set to report back this year.

Irwin Mitchell’s lead practice development lawyer Joanne Moseley told FE Week that the move by the government had been unexpected.

Before the consultation, the advice was for colleges to prepare backdated payments. That advice has now changed.

The law firm expects the government to respond to the consultation in the autumn – which could mean any changes come into effect next year.

“Our advice is to be pragmatic,” Moseley told FE Week. If a college has already changed its contracts to implement the changes after the legal case, it should stay with that course.

If, however, colleges are in the process of changing the contracts, a different approach could make more sense.

“You might be able to build in flexibility in the contracts of employment, so that you can then reduce the amount of holiday they receive if the law changes.” If a college has done nothing to implement the changes, a “wait and see approach” could be more fruitful, Moseley said.

“What we are saying is that, yes, that’s the law: you are breaching the law. But, if people are not bringing claims, do you want to alert them to this?”

A Department for Business and Trade spokesperson said: “We want to address disparities in holiday pay and annual leave entitlement to ensure any entitlement is directly proportional to the time spent working.

“This is why we launched a consultation on holiday entitlement which ended in March, and we will issue a response in due course.”