For many years, schools and universities have been marking their own exams when it comes to the calculation of holiday pay for their 'Part Year' workers.
They may well have been doing this in a perfectly innocent fashion – for example by reliance on the ACAS guidance regarding casual workers' entitlements – but the Court of Appeal has clarified in The Harpur Trust v Brazel that, in fact, they may have been failing to make the grade.
First, a note on terminology. The moniker 'Part Year' worker was coined by Underhill LJ in this case to describe the situation of Ms Brazel. She was a music teacher engaged on a permanent, zero-hours contract. This meant that the Trust was not obliged to provide her with any work and she was only paid for the hours she did work, which naturally only fell within term time and not during vacations, but her contract subsisted year round. This is in contrast to a permanent, salaried teacher or lecturer and is a common arrangement in schools and universities, particularly to fill gaps and allow flexibility in their teaching capabilities.
When calculating her holiday pay, the Trust had followed the ACAS guidance which holds that for casual workers, in order to properly reflect the 5.6 weeks statutory minimum under the Working Time Regulations (WTR), their holiday pay entitlement is equivalent to 12.07 per cent of their hours worked over the year. The Trust followed this and effectively pro-rated the statutory minimum in order to reflect the number of hours which she actually worked.
For a 'Part Year' worker, such as Ms Brazel, this is not the correct approach – the WTR do not make provision for pro-rating in this situation and the worker's entitlement is still to 5.6 weeks.
Instead, despite the anomalous results that may arise in certain cases, those who engage 'Part Year' workers are required to:
- Calculate the worker's average weekly pay over the 12 weeks (in which they were paid something) prior to the first day of the relevant holiday (52 weeks from 6 April 2020); and then
- Multiply that figure by 5.6, in order to determine the worker's annual entitlement to holiday pay.
In Ms Brazel's case, this meant that she had been underpaid by the Trust and was entitled to holiday pay equivalent to 17.5% of her annual earnings, rather than 12.07% (the entitlement of full time workers). This may seem odd and the court did consider potential unfairness, but felt that the advantages to institutions (e.g. safeguarding clearance) of engaging workers year round rather than for short stints meant they had to accept the additional costs.
The practical impact of this decision for universities is that they are likely to have been underpaying any 'Part Year' workers who are engaged under a permanent year round contract. As a result, they may be exposed to claims for unlawful deductions from wages.
On top of that, the judgment throws up several practical questions which were not addressed, including:
- When should this calculation be done? For example, can it be done at the end of the first term of three and then split into three payments to spread out the payments for a worker? If so, what if the worker is substantially busier in the second or third term? Would an annual corrective payment need to be made?
- What about any additional contractual leave – how is this to be dealt with? Can the pro rata principle be applied to any leave in excess of the statutory minimum or would this be less favourable treatment contrary to the Part-Time Workers Regulations?
- What precisely is the leave (as opposed to pay, which is all that this case applies to) entitlement for 'Part Year' workers? This may be moot in cases where the relevant vacations which the worker is entitled to take off are well in excess of the statutory minimum.
Further litigation would be required to answer these questions, which is plainly unsatisfactory for universities attempting to comply with the law in the real world on a day-to-day basis. One option would be to change nothing until the law is further clarified, but that is risky and clearly wrong on the current state of the law.
Instead, they should adopt a pragmatic approach as many employers do in light of the uncertainty around holiday pay following the Bear Scotland case and associated litigation, i.e. get as close to the correct payment as they reasonably can based on the current state of the law. For instance, a university may decide it will apply the Brazel formula at the end of each term, but then divide this sum by the number of terms in the holiday year. If there is a disagreement with any worker, then it could look to settle any such claim by paying what would hopefully be only a small corrective sum.
The law around holiday is complex and, seemingly, ever shifting, but ignorance – even if in good faith – will never be an excuse if a claim is brought. If in doubt, please do get in touch to discuss.