Harpur Trust v Brazel – Where does this leave us?

There’s been a lot of publicity recently about the Supreme Court case of Harpur Trust v Brazel and its impact on calculating holiday entitlement and pay for workers.

The case specifically concerned holiday entitlement and pay for what were termed ‘part-year workers’.  These are workers who are on a permanent contract, who work irregular hours and who do not work every week of the year.  The case impacts on workers such as term time workers, like Mrs Brazel in this case, but also wider groups like casual and zero-hour workers. Employment Associate Louise Keenan explains.

Transcript

Hi, my name’s Louise Keenan and I’m an Associate in the employment team at Clarkslegal.  

There’s been a lot of publicity recently about the Supreme Court case of Harpur Trust v Brazel and its impact on calculating holiday entitlement and pay for workers.

The case specifically concerned holiday entitlement and pay for what were termed ‘part-year workers’.  These are workers who are on a permanent contract, who work irregular hours and who do not work every week of the year.  The case impacts on workers such as term time workers, like Mrs Brazel in this case, but also wider groups like casual and zero-hour workers. 

So, let’s look at the facts of the case

Mrs Brazel was a music teacher at a School run by the Harpur Trust.  She worked different hours each week, depending on how many pupils had signed up for her lessons.  Often, she would work between 10-15 hours each week but some weeks were a lot less and she didn’t work at all during the school holidays.  She was engaged on a permanent zero-hours contract and like many teachers, she was required to take her leave during the school holidays when she was not working.  

Initially the school viewed her as having 5.6 weeks entitlement to annual leave.  They divided this into three tranches of 1.87 weeks and required her to take the first tranche in the Winter school holidays, the second in the Spring school holidays and the third in the Summer school holidays.   Her pay was calculated on the basis of average remuneration over the preceding 12 weeks so in each of the school holidays she was paid for 1.87 weeks based on this average pay calculation.  This was, the Supreme Court held, the correct approach. 

Just a point to flag at this stage to avoid any confusion, now the law requires holiday pay to be averaged over a 52-week reference period for those with no normal working hours but at the time Mrs Brazel was working, the law only required a reference period of 12 weeks. So, when Harpur Trust used the 12 week average method I have just mentioned, that was legally acceptable at the time. 

For some reason, in September 2011, the Harpur Trust changed the way it calculated Mrs Brazel’s holiday pay.  It still divided her leave into three equal tranches, but it calculated her pay following a method recommended by ACAS at the time. 

The ACAS guidance said that, if a member of staff works on a casual basis or very irregular hours it is “often easiest” to calculate holiday entitlement that accrues as hours are worked and it suggested that employers could use a percentage method to achieve this and to calculate holiday entitlement and pay – and that percentage, you may have heard of, was 12.07%.  I won’t get into how this 12.07% is calculated but in this case, it meant that Harpur Trust averaged Mrs Brazel’s hours out across the term, calculated what 12.07% of this was and then paid her hourly rate based on the percentage figure. 

Taking one term, as an example, the old method resulted in her being paid just over £680 for the 1.87 weeks leave.  Under the percentage method she only received around £450, so it was significantly less. 

Mrs Brazel brought a claim for unlawful deduction of wages against Harpur Trust which made it all the way to the Supreme Court.  

In terms of holiday entitlement, the Supreme Court held that she was entitled to 5.6 weeks leave.   In terms of pay, as she was a worker with no normal hours, her pay should be based on the statutory formula.  The statutory formula required her employer to average her remuneration paid over the preceding 12 weeks, discounting any weeks when no remuneration was paid.  For those weeks where no remuneration was paid, earlier weeks could be taken into account instead. 

It essentially found that the 12.07% method was a different method to that prescribed by law, had no legal basis and resulted in an underpayment to Mrs Brazel. 

Harpur Trust’s representatives pointed out that this approach could lead to absurd results.  For example, an exam invigilator who works full time for only 3 weeks of the year would be entitled to be paid for 5.6 weeks holiday based on average pay during those 3 weeks so such a worker would end up with holiday pay almost twice as much as their annual earnings.  However, the Supreme Court said that any slight favouring of workers with a highly atypical work pattern would not be so absurd as to justify the wholesale revision of the statutory scheme.  It said that general rules sometimes provide anomalies when applied in untypical cases and it would be unusual for a worker whose services are only required for a few weeks a year to be engaged on a permanent contract anyway unless there was some other good reason to do so. 

The Supreme Court further recognised that Mrs Brazel may be entitled to a proportionately greater leave requirement than full-time workers but said there was no law against treating part time workers more favourably and that the approach it had taken was compliant with the Working Time Directive.  

So where has this case left us?

Well, quite frankly in an unclear position on what to do next!

What is clear is that all workers are entitled to be paid for 5.6 weeks of leave and that, if they have no normal hours, employers are expected to calculate a week’s pay in line with the statutory formula.  This means taking their average remuneration over the preceding 52-week period, discounting any weeks where no remuneration was payable and substituting earlier weeks in place of these.  

However, the issue is that it’s impossible to tell what 5.6 weeks looks like in terms of hours or days for most genuinely casual and zero-hour workers in advance – at the start of the year you simply do not know what they are going to work.   If the worker requests a day off – how do you know how much of their 5.6 weeks entitlement this uses up and how much to pay them for that day?  It’s extremely complicated and, at this stage at least, there doesn’t appear to be any clear answer to suit all.

Subject to any contractual obligations on the employer, it seems one potential option would be to break holiday into tranches and dictate that workers take these tranches of leave during times when no work is required, like in Mrs Brazel’s case.

Alternatively, employers could allow their workers to request leave when they would like it but require them to take the leave in full weeks at a time, perhaps agreeing for them to have unpaid leave (or simply not to be on the rota) for any ad hoc days they want off to try and minimise the impact of this.

Neither of these options are likely to be particularly attractive to workers.  

Some organisations are suggesting that it may be possible to calculate leave based on hours worked over the preceding 52 weeks, excluding any weeks not worked, but there is no guarantee that this would meet the legal requirements.  It would also require complex calculations every time leave is taken and the Supreme Court in the Brazel was actually quite critical of methods which may result in overly complex calculations for the employer and also made the point that the law on calculating pay and entitlement were different and this approach would arguably be treating them very similarly.  It also remains to be seen if any organisation develops software that could help businesses with such complex calculations but, even then, businesses will need to consider if this is the best option commercially for them given the costs and risks involved. 

It is an option for organisations to restructure contractual agreements, for example, as the Supreme Court noted, it may be that if you have a situation similar to the exam invigilator example you may want to engage them on a temporary contract and not a permanent one, but this is not without legal risks and may not work commercially in any event.

One thing is for sure organisations are going to need to review their working practices to see whether this Supreme Court judgment could impact them and seek advice on whether they need to alter their holiday arrangements. 

That brings us to the end of this podcast.  Please do contact our employment team at Clarkslegal if you need any advice on calculating annual leave and the impact of this case on your working arrangements.