Almost three years after the Court of Appeal found in favour of Mrs Brazel in her claim against her employer, Harpur Trust, the Supreme Court has upheld the Court of Appeal’s decision.
Mrs Brazel is a visiting music teacher, employed by Harpur Trust on a term time only contract. She is paid hourly and her hours during term time vary from week to week depending on how many pupils want saxophone and clarinet lessons in any particular week. She is entitled to the statutory minimum holiday entitlement of 5.6 weeks, which she is required to take during school holidays.
As is common practice at many schools, Mrs Brazel was deemed to take her holiday entitlement in three equal tranches during the Christmas, Easter and Summer holidays, and at the end of each school term she was paid holiday pay equating to 12.07% of the hours she had worked that term. Mrs Brazel argued that this method of calculating holiday pay was incorrect. The Court of Appeal agreed with her, and the Supreme Court has upheld the Court of Appeal’s decision, ruling that the Working Time Regulations do not permit the use of this method for calculating holiday pay.
The Supreme Court acknowledged that its decision would see affected term time only staff receive a higher rate of holiday pay than staff who work all year round. However, the Supreme Court’s reasoning for its ruling was that Parliament had set out a clear method for calculating an average week’s pay and that the 12.07% mechanism was contrary to that method. The fact that Mrs Brazel would be entitled to a proportionately greater holiday entitlement than year-round workers was considered by the Supreme Court to be fully compliant with the law.
What does this mean for schools?
Since the Court of Appeal’s decision in 2019, many schools had been adopting a “wait and see” approach whilst we awaited the Supreme Court’s decision. Schools now need to re-examine how they calculate holiday pay for term time only workers to ensure they are compliant with the Supreme Court’s ruling – for many schools this will mean changing longstanding practices. Schools need to ensure that:
- Term time only staff with regular hours receive their full 5.6 weeks of statutory paid holiday each year, regardless of the number of weeks they have worked that year. This figure cannot be pro-rated. For some part-years workers who are retained on permanent contracts but who only work for a couple of weeks a year, such as exam invigilators, this will result in an extraordinary holiday entitlement. Schools may want to take the opportunity to consider whether they wish to continue with this practice for such staff, or whether a move to short fixed term contracts would be preferable.
- Staff who work irregular hours are paid for 5.6 weeks’ holiday at a rate of pay that is calculated by reference to their average weekly rate of pay over the previous 52 weeks, discounting any periods when they do not work, such as during school holidays. These payments should be paid when the holiday is actually taken. The 12.07% multiplier must no longer be used.
What are the legal risks?
When staff become aware of their entitlement to an increased rate of holiday pay, it is likely that some will query why they were not previously paid this increased rate. The biggest risk for schools will therefore be possible claims from staff for back pay for historic underpayments in holiday pay. Any claim from staff for holiday pay arrears could potentially see schools having to pay staff for underpayments going back for two years.
In addition, the Supreme Court’s ruling means that most term time only staff who work irregular part-time hours will now receive a higher rate of holiday pay than their part-time counterparts who work all year round. This means schools may therefore face the challenge of managing potential friction amongst staff who are struggling with the perceived inequality in their rates of holiday pay.
What action should schools take now?
As a first step to ensuring compliance with the Supreme Court’s ruling, schools should carry out an audit into the holiday pay arrangements for their term time only staff. As part of this audit, schools should ensure they understand which members of staff may now be considered to have been underpaid holiday pay. Schools should also ensure they have a clear idea of the amount of potential back pay exposure there could be, in the event that all affected staff were to demand two years’ back pay for holiday underpayments.
Schools need to consider what steps they will take to ensure term time only staff are paid the correct amount of holiday pay going forward. Ideally these new arrangements should be put in place for the start of the Autumn Term, so it is worth using the summer holiday as an opportunity to assess how holiday pay arrangements will be managed, to prepare communications to staff and to make any necessary updates to staff members’ contracts. It is also worth noting that once schools start paying the increased amount of holiday pay, staff will then have a three-month deadline within which to bring any claim for holiday pay arrears, following which they will forfeit their right to claim for back pay.
Some schools may wish to avoid potential claims and be seen to be ‘doing the right thing’ and make payments to affected staff for back pay.
How Moore Barlow can help
Given the significant legal risks associated with this important change, we would recommend all schools take legal advice on how to manage this issue. We can support you with your audit of holiday pay arrangements, take you through your options for ensuring staff are paid the correct amount, and help you manage any potential claims for back pay. If you would like any guidance, please contact us today.