5 Million employment tribunal claims possible after tomorrow (not really though)

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What a load of nonsense: "Law urgently needed to stop backdated holiday pay claims, employers urge"


Anyone from the FSB, BCC, or IOD on here anymore to comment on this?

I'm trying to understand why these organisations think that urgent legislation is necessary to avoid a potential 5 million claims.

The Guardian said:
Mike Cherry, policy chairman of the FSB, said: “The government must bring in emergency legislation to prevent the backdated claims. [If they don’t act] hundreds of businesses will shut down and that will lead to thousands of employees being laid off.


Have we seriously had 5 million people that took annual leave in the last 3 months who were also paid for overtime in the last 3 months? And they are all waiting excitedly for this judgment so they can start an employment tribunal claim?


There are numerous news reports that have appeared today, reporting enthusiastically that two Employment Appeal Tribunal rulings expected tomorrow morning could open the flood gates for 5 million employment tribunals. And the latest article I've seen - the link above - quotes the FSB, the BCC & the IOD as suggesting that "hundreds of businesses will go bust unless the government acts to prevent employees lodging pay claims following a historic legal ruling expected on Tuesday."

Sorry, but this is just scaremongering.


Let's assume worse-case scenario for employers - the appeals fail, the cases are ruled in favour of a legal issue on what makes up pay for the purposes of Regulation 16(1) of the Working Time Regulations (this says that a worker is entitled to be paid in respect of any period of annual leave to which he is entitled under regulation 13 and regulation 13A, at the rate of a week’s pay in respect of each week of leave) and the crux of the judgment tomorrow will be what is the "rate of a week's pay" - that it includes overtime.

The argument is that overtime (voluntary or otherwise) should be counted as part of a week's pay.
If the judgments do conclude that previous overtime should be counted towards the rate of pay for leave in the future, that will have an influence on how overtime & annual leave should be provided. But it’s difficult to imagine how 5,000, let alone 5 million, claims could be brought for historical deductions from wages.


In even in this worse-case scenario, there are conditions that have to be met: a worker would have to have been paid for annual leave in the last three months, but the calculations used for that didn’t include any overtime in the 12 weeks prior to their leave.

This is because a claim for a deduction from wages has to be brought within 3 months of the alleged deduction – the last time that pay was provided for annual leave. (The argument about this dating back to 1998 is that the deductions could be considered continuous – that these have applied since the Working Time Regulations were first introduced.) And where pay is varied every week (which it could be if overtime is voluntary), the calculation to determine the rate of a week’s pay is to take the average of the 12 weeks prior to that when the leave is taken.

Even then, a worker would have to file their claim within three months of the last pay date that included pay for annual leave. Late, and you miss out – as long as the employer corrects their pay rates going forward (and we won’t know whether that’s necessary until about 10:30 on 4 November, and even then, further appeals are possible (even likely)).



The reason I suggest the FSB, BCC, and IOD are scaremongering (or perhaps simply need better lawyers) is that it is perfectly possible to not have paid the correct (or any) holiday pay for years, and still get away with it. Take the case described at emplaw.co/Prosser: in that case, under the strict interpretation of the law involving rolled-up holiday pay, there had been no leave paid for more than six years – and this was entirely conceded. But the Claimant hadn’t brought a claim for the six years holiday pay in time, and therefore lost the lot – the employer actually saved £000’s that they expected to have to pay in back-dated holiday pay.


Fees to bring employment tribunal claims have reduced the frivolous claims, and as I enjoy defending them, it’s in my interest to see more - 5 million would be great for my industry! But as it’s not in the interest of small employers, I want to know why they are being fed this drivel that emergency legislation is required from the major business organisations. It’s not required. The law hasn’t changed on this point in 16 years, and it certainly doesn’t need to change urgently if a judgment doesn’t go the right way (which is a different way depending on the interested party). Sadly for me (but good for my clients) there will not be a possible 5 million tribunal claims involving back-dated holiday pay. So, anyone from the aforesaid to comment?


If the judgment does go badly (for employers) tomorrow, my advice is to not permit any leave within 3 months of the last time overtime was paid - letting any deadline expire - but if leave is approved, ensure that it is paid with an allowance for overtime included. These steps will ensure that the clock - the time-limit of 3 months - is not reset, and unless the worker acts urgently, the risk is reduced daily, and should quickly run out.

And if you're a member of one of the aforementioned organisations, ask why they think it's as bad as they're portraying. I'd love to know.



Karl Limpert
 
Well, decision announced... 5 million employment tribunal claims to follow (impressively, https://www.gov.uk/apply-employment-tribunal is holding up well given the forecast number of claims :rolleyes:) - appeal declined, holiday pay has to include overtime.

And that means the subsequent appeals will likely go down the slower route before this issue is finally resolved - to the Court of Appeal before the European Court. (The ECJ will ultimately rule that overtime should be included in calculating holiday pay.)


Karl Limpert
 
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Newchodge

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Nov 8, 2012
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Never heard so much rot in all my life TBH! People want to be paid for VOLUNTARY overtime? Beats me how anyone with more than one working brain cell can believe this is a sensible idea. If it was mandatory overtime I might support it buy Voluntary? The world's gone mad.

Err Your post suggests that people who volunteer for overtime should do it for no money.

the reality is that many employers give employment contracts for zero or 5 or 10 hours per week, but then ask their staff on those contracts to work 35 or 40 hours every week. As 'voluntary' overtime. Refuse it and lose your job, but what the heck, it's voluntary. Then , when they take their legal entitlement to paid holiday, their 'week's pay' is only the contract hours, not the real hours they work week in, week out.
 
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Err Your post suggests that people who volunteer for overtime should do it for no money.

the reality is that many employers give employment contracts for zero or 5 or 10 hours per week, but then ask their staff on those contracts to work 35 or 40 hours every week. As 'voluntary' overtime. Refuse it and lose your job, but what the heck, it's voluntary. Then , when they take their legal entitlement to paid holiday, their 'week's pay' is only the contract hours, not the real hours they work week in, week out.

Hmmm, I guess it may do if you wish to interpret it like that. However, if you read the original post I think you can see what I meant.

Let me put it bluntly, as someone who worked both voluntary and mandatory overtime for longer than I care to remember starting in the mid 60s. Holiday pay should bear no relationship to the amount of voluntary overtime you do but should purely be your normal basic salary. As to the mandatory overtime bit, well I never got paid any extra with my holiday pay, just my normal basic salary although I can see the argument for paying it. What we did get was annualised hours where we were paid basic plus x hours overtime averaged out over the year. That makes sense to me.
 
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I have calculated the costs to my business of introducing HP provision onto bonus and voluntary overtime and it comes to 5% by the time you add on Employers NI to the additional pay. That's a not inconsiderable sum on top of the very generous 10% pay rise we just awarded to staff in September and the additional employer costs with the commencement of NEST pensions.

As this extra holiday pay element has not been planned for and wages are the vast bulk of our operating costs its going to impact very hard, in fact it'll crush our trading profit. We have already devised our response. There will be no wage increase next year and overtime rates will be frozen for a further two years. This way, over a three year period the wage cost increase 5% will be largely negated and turned effectively into a short term increase for workers marginally ahead of what would be expected to occur with annual rises.
 
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Anonymouse72

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Jun 16, 2012
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i don't actually use Sage, but i've just had an email from them regarding this, along the lines of "don't get caught out, new ruling 4.11.14, our payroll software can handle it" type of thing. it really read as if this was in force now? will there be official notification from HMRC on this & has the actual definition of 'regular overtime' been pinned down yet??
 
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Newchodge

Business Member
Nov 8, 2012
16,221
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It is nothing to do with HMRC, and everything to do with the Working Time Directive.

Staff in this country are legally entitled to 5.6 weeks holiday per year. Under the WTD they are entitled to 4 weeks. Employers in this country have always defined a week by the employee's contracted hours. This case means that they should use their actual weekly remuneration when calculating a week. The legislation already states that staff with variable working hours calculate their week's holiday by looking at the previous 12 weeks for which they have been paid, and taking an average of that.

The case is likely to be appealed.

Staff cannot claim backdated holiday pay more than 3 months past if there has been a 3 month gap during which they were not wrongly paid holiday pay.
 
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I see the government have proposed that claims cannot be backdated more than 2 years for June 2015. A relief for most I'd assume.
I'm interested to know of how many people who calculated backdated overtime it worked out to more than the additional 1.6 weeks that the UK provides?


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