The saga of Ms Brazel and the Harpur Trust
However, the now infamous case of Harpur Trust v Brazel started a long-running legal battle which highlighted the difficulties of this approach where the worker is a term-time only (TTO) worker. This is because there are weeks in the year where the worker is under contract, and consequently accruing annual leave, but is neither working or on paid annual leave.
The brief facts of the case are that Harpur Trust (the Trust) employed Ms Brazel, a part-time music teacher, on a TTO contract. The Trust calculated Ms Brazel’s annual leave entitlement based on the time she worked i.e. term-time. In line with UK statutory minimum annual leave entitlement for full time staff, the starting point should have been that Ms Brazel was entitled to 5.6 weeks of paid annual leave per year.
In 2011, the Trust changed how it calculated annual leave entitlement. It adopted the approach referred to above in that it calculated Ms Brazel’s annual leave entitlement as 12.07% of the average hours she worked over a term.
Ms Brazel claimed that this method of calculation resulted in her receiving less holiday pay than she was entitled to. She brought proceedings in the Employment Tribunal and she argued that her annual leave entitlement should be calculated at the end of each term based on her average earnings over the last 12 remunerated weeks, as required by the Working Time Regulations 1998 (WTR) and the Employment Rights Act 1996 (Please note that this changed to 52 weeks as of 6 April 2020). This calculation would have meant she received holiday pay equal to 17.5% of pay for hours worked, and not the 12.07% she actually received. It also would have meant that she received more generous holiday pay than her full-time colleagues.
The issue was whether under the WTR the calculation of Ms Brazel’s holiday pay should be pro-rated to that of a full-year worker to reflect the fact that she did not work throughout the year, or whether a different approach should be adopted having regard to the fact that she was a part-year worker.
The trajectory of Ms Brazel’s claim
The Employment Tribunal disagreed with Ms Brazel’s argument and found that the Trust had applied the correct calculation. Her claim was dismissed. Ms Brazel appealed.
The Employment Appeal Tribunal (EAT) found in her favour i.e. that the Trust had incorrectly calculated her holiday pay.
The Trust then appealed to the Court of Appeal arguing that its calculations reflected the fact that Ms Brazel worked part of the year only and that she should only accrue holiday pay for the parts of the year she worked (i.e. term time), whereas a year round employee would receive holiday pay calculated in accordance with the parts of the year they worked i.e. all year.
The Court of Appeal dismissed the Trust’s appeal and the Trust appealed to the UK Supreme Court, the highest civil court in the UK.
The appeal was heard in November 2021 and employment lawyers have been waiting with bated breath for the Supreme Court’s decision, which was finally published on 20 July 2022.
What the UK Supreme Court Judgment says
The Supreme Court unanimously dismissed the Trust’s appeal and upheld the decision of the EAT and Court of Appeal. This means that part year workers, which includes TTO workers, are entitled to be paid holiday pay accrued in line with at least the minimum statutory entitlement laid down in the Working Time Regulations 1998 (WTR) i.e. 5.6 weeks per year, even though they do not actually work all year round. The WTR were made pursuant to the UK’s obligations under the EU Working Time Directive (WTD).
In summary, the Supreme Court concluded (as had the lower appellate courts before it) that the WTR made no provision for pro-rating holiday pay, which is what underpinned the application of the 12.07% formula in the case of a part-year worker. The court found that the WTR simply require, as Ms Brazel had argued, the straightforward exercise of identifying “a week’s pay” and multiplying that figure by 5.6. In respect of the WTD, the court found that the WTD does not prescribe any particular mechanism for the assessment of holiday pay entitlement; and Article 15 expressly provides that member states may accord workers entitlements which are more favourable than those required by the Directive itself.
It is important to remember that in the Harpur Trust case the courts were concerned specifically with the position of part-year workers under the WTR and WTD. They were not concerned with workers who work part-time, namely those who work throughout the year but for only part of the week.
What is the effect of the Judgment?
The education sector employs lots of staff on part year contracts or other atypical arrangements. As such, this Judgment is important for school and academy employers to be aware of, in the light of which they must now take steps to review their current practices and make changes where necessary to bring their holiday pay calculations in line with the Supreme Court’s decision.
There are some important practical steps that schools and trusts can take to reduce the risks they may face in light of the Judgment, and to ensure that going forward their calculations of TTO holiday pay are legally compliant:
- Most importantly, check what methodology you currently use for calculating holiday pay for TTO staff and other staff where their hours are variable. It is likely that many schools and trusts will have already moved away from the previously widely used calculation of 12.07% given the EAT’s decision in March 2018. However, it is still worth checking to make sure that all atypical arrangements have been covered off.
- In the event that you have not yet changed your method of calculating holiday pay for part-year workers in line with this case, you should take steps to do so without delay to reduce you ongoing liability to pay unpaid holiday pay to affected staff.
- Where you have already made the changes, often in line with trade union advice and local authority advice and practice, you may still have some staff who have historical claims. In such cases, it will be important to understand where liability for these claims may sit, especially where a formerly maintained school has become an academy or where there has been a change of employer. Steps you should consider include:
- Academy Trusts should check any appropriate Commercial Transfer Agreement which would usually set out the apportionment of liabilities;
- Trusts/schools should speak to the local authority to find out what their position is and if liability is denied, you may consider seeking legal advice to confirm the legal position on apportionment of liability.
What claims can affected staff bring and how long do they have to bring them?
Staff that have not received the correct holiday pay have the option to bring an unlawful deduction from wages claim either in the Employment Tribunal, in which they must present their claim within 3 months of the last deduction, or in the county court, in which the limitation period is more generous, being 6 years for a breach of contract claim. The latter may be particularly relevant to staff who have left employment but have a historic holiday pay claim. Therefore, it is very possible that a large number of staff, current and former, could be affected. It is also possible to argue that failure to pay the correct holiday pay amounts to less favourable treatment of a part time worker under The Part-time Workers (Prevention of Less Favourable Treatment) Regulations 2000.
How far back can a claim go?
By virtue of The Deduction from Wages (Limitation) Regulations 2014, staff are entitled to recover losses incurred in the two years before the claim was presented (previously this was 6 years).
However, schools and trusts will need to be mindful of any workplace policy that it operates that allows for backdated claims beyond this statutory backstop as that period may take precedence. If you are in doubt about your liability, you should seek advice.
Practical steps to reduce or remove the risk of claims
We strongly advise schools and trusts to take expert legal advice on how best to untangle what will inevitably be a complex holiday pay issue. As a starting point you should take steps to identify all those staff potentially affected, and fully engage with your trade unions with regard to not only resolving any back pay issue, but also agreeing a new formula for calculating holiday pay (if you have not already done so). We encourage all schools and trusts to speak to the Local Authority to glean what agreement (if any) they have reached with the unions on this issue, as this will help inform any union negotiations that you may be engaging in.
Claims arising out of the Harpur Trust litigation will generally be of relatively low value and from a commercial perspective the best approach tends to be to look at negotiated settlement of backpay claims before affected staff issue claims. The cost of litigation could be significant and probably far greater than the value of the holiday pay owed. A school or trust would also struggle to successfully defend any such claim since Harpur Trust has established that the previous methods of calculating TTO holiday pay based on a pro-rata principle were not compliant with the law.
It is probable that employers will be able to settle claims without the associated cost and high risk of losing in the litigation.
Many schools had already received claims which were stayed pending the decision by the Supreme Court. Now that the time has come, those claims will no longer be stayed and so prompt settlement of those claims should also be considered.
Schools and trusts should also be aware that claims arising out of the Harpur Trust litigation are unlikely to be covered by insurance/the RPA on account of the claim arising from a statutory entitlement that the worker had all along, and the fact that the prospect of successfully defending such a claim is low where the formula adopted did not comply with Harpur Trust.
Finally, it is important to remember that this decision does not only affect teaching staff. It applies to all atypical workers who are employed on part-year contracts including cleaning staff, facilities management, zero hours/casual workers and any other support staff working varying or atypical hours on a TTO basis.
Our dedicated Schools HR Team of lawyers has assisted many of our schools and academy trust clients with successfully resolving claims and disputes arising out of the Harpur Trust litigation. They can also assist with reviewing your current practices and identifying areas of risk, advise on liability, including determining whether liability falls to a third party, supporting any union consultations/negotiations and formulating strategy to cost effectively deal with actual or prospective claims.
For more information or to discuss your needs and how we can support you, please contact our Schools HR team on 0345 026 8690 or schoolshr@wslaw.co.uk
