Government Taskforce to Assess Impact of EAT Holiday Pay Ruling

Following the ruling of the Employment Appeal Tribunal (EAT) that employers should include ‘non-guaranteed’ overtime that is routinely worked when calculating an employee’s holiday pay, the Government has announced that it is setting up a taskforce to assess the possible impact of the decision.



The EAT held that Article 7 of the EU Working Time Directive (WTD) should be interpreted so that payments for overtime which employees are required to work but which their employer is not obliged to offer them do count as ‘normal remuneration’ for the purposes of calculating holiday pay taken under Regulation 13 of the Working Time Regulations 1998 (WTR).



However, the EAT went on to find that this decision only applies to the 20 days’ annual leave entitlement guaranteed under the WTD, not the additional eight days entitlement granted under Regulation 13A of the WTR, and claims for unlawful deductions from holiday pay will be subject to the three-month limitation period for bringing claims as laid down by the Employment Rights Act 1996. This will limit any retrospective liability on the part of employers, particularly as the EAT ruled that additional leave under Regulation 13A should be ‘the last to be agreed upon during the course of a leave year’.



Recognising the importance of the issues in these cases, the EAT granted the parties leave to appeal to the Court of Appeal on all points on which they lost, but doubted whether an appeal against its main finding as regards guaranteed overtime and normal remuneration would succeed. Of particular interest will be the Court’s view as regards the limitation period for bringing a claim in this context.



In the light of the EAT’s decision, Business Secretary Vince Cable said, “Government will review the judgment in detail as a matter of urgency. To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgment.”