The EAT has given some guidance on holiday pay claims following the Supreme Court’s decision in Agnew last year that workers can bring a ‘series of deductions’ claim for underpaid holiday notwithstanding a three month gap between deductions (see here). Deductions need to be sufficiently similar and sufficiently temporal to form part of a series. The EAT in British Airways plc v Mello ruled that deductions arising from a failure to factor in a number of types of allowance when calculating holiday pay were sufficiently similar to form a series and the tribunal had erred in approaching each allowance separately – an overly granular analysis should be avoided. When considering whether there is sufficient temporal link, tribunals should bear in mind that there will inevitably be gaps in time between successive holidays (implying that this factor alone will not break a series). The ruling suggests that in many cases it may be difficult for an employer to argue successfully that holiday pay deductions do not form a series.
The EAT also ruled that an allowance is either an expense payment genuinely and exclusively to cover costs (and so excluded from holiday pay) or a performance-related payment (included in holiday pay), and could not be apportioned between these types so that only part of it was included.
Agnew established that, if it is not practicable to distinguish between days using the EU-derived 4 week leave entitlement and those using the domestic 1.6 week entitlement, then all the leave to which the worker is entitled must form part of a single, composite pot (so each day taken includes a proportion of both types of leave). This suggested that employers could still specify contractually (in advance) that the 4 weeks’ leave is taken first. An obiter comment of the EAT in Mello suggests that employers who have done this cannot use it to argue that a series of deductions has ended earlier than otherwise (so that the claim is out of time). However, such clauses will still be helpful where an employer has provided that pay or carry-over rights vary between the two types of leave.
For further information, please contact:
Anna Henderson, Herbert Smith Freehills
anna.henderson@hsf.com
