Education employers will have to review holiday pay arrangements of term-time-only workers and may face legal claims for back-pay following a landmark court ruling.
An employment appeal tribunal ruled in 2018 that Bedford Girls School music teacher Lesley Brazel was underpaid because of the way her holiday pay was calculated.
Today, the Supreme Court quashed an appeal by the school’s parent charity, the Harpur Trust.
It means employers with permanent staff on term-time-only contracts must from now on calculate their holiday pay based on the hours they work in a normal week, rather than paying them pro-rata based on the number of weeks they work each year.
Legal experts and professional bodies today warned the case would have huge ramifications for schools, colleges and other employers, with those paid incorrectly potentially entitled to back pay.
The Incorporated Society of Musicians, which supported Brazel in her legal action, said the case “could improve holiday pay for thousands of workers in the education sector and beyond”.
Chief executive Deborah Annetts said music teachers “often go above and beyond for their students but all too often they are not treated in the way they deserve”.
A spokesperson for the Harpur Trust said the ruling “will have significant cost implications for a number of sectors, including state and independent schools, the care sector and higher education”.
Ruling will create ‘significant financial burden’
Joanne Moseley, an employment lawyer at Irwin Mitchell, said the “significant decision” would be a “blow to many thousands of employers across the UK who, up until now, have pro-rated holiday entitlement to reflect the number of weeks employees work each year”.
“Many employers have adopted a ‘wait and see’ approach but we’re now at the end of the road. We’ve seen that organisations have been caught out by previous holiday pay rulings and this one is sure to place a significant financial burden, which could run into millions of pounds, for many.”
Nick Hurley, partner at law firm Charles Russell Speechlys, said the ruling would make “holiday pay much more expensive for employers who have this type of arrangement and is most likely to affect those in the education sector”.
“This could open the floodgates for other part-year permanent workers who have had their holiday calculated incorrectly to bring claims for unlawful deductions from wages for any difference in what they have been paid and what they should have received, although there is a two-year backstop on these claims.”
Trust was wrong to ‘pro-rate’ holiday pay
Brazel, who has taught the saxophone and clarinet at Bedford since 2002, took her case to employment tribunal following a change to her pay in 2011. She worked variable hours each week during term time and is only paid for what she teaches.
The trust had previously calculated her holiday pay based on what she would earn in an average week and multiplied it by 5.6, the statutory number of weeks of leave in England, ignoring any weeks in which she did not receive any pay.
But from 2011, the Trust changed its method and calculated the total number of hours Brazel worked each term, took 12.07 per cent of that figure and paid her for that number of hours.
This was based on guidance from the Advisory, Conciliation and Arbitration Service, which has since been rewritten.
Although the first employment tribunal dismissed her claim, she successfully appealed, with the employment appeal tribunal ruling that her holiday pay should be based on a normal working week.
The Harper Trust appealed, but the Court of Appeal rejected their appeal in 2019, again ruling that the so-called “calendar week method” was the correct implementation of the law.
Employers must ‘immediately change’ practices
The Supreme Court ruled today the Court of Appeal was “correct” to reach that view.
“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.”
In an example included in the judgment, the court said Brazel’s pay for the Easter holiday in 2013 would have been £687.26 under the calendar week method, compared to £452.20 under the pro-rated approach.
Lesley Rennie, principal employment solicitor at WorkNest, said many employers would need to “immediately change their holiday pay practices”.
But they will also need to “assess their historic liability and make a judgement call on whether to make a back-payment in respect of any holiday pay underpayments or to bear the risk of a claim”.
“Employers should be mindful that if this case is widely reported, employees are more likely to be aware of it and assert their rights.”
Brazel said the case had been “long and arduous”, but she was “pleased to have secured my holiday pay rights, in accordance with the law and my contract of employment, in the highest court in the country”.
“I hope that others can now benefit from this verdict.”
The Harper Trust said: “We welcome the clarity that this judgement brings and will now focus on determining our next steps in ensuring that holiday pay is adjusted for those affected.”