ABG Employment Newsletter – January 2015

Recent developments regarding calculation of holiday pay

As you may have seen in the press, there have been a number of cases recently dealing with the issues of how holiday pay should be calculated and whether it should include overtime.  Under the Working Time Regulations, an employee has a right to take leave and to receive ‘a week’s pay’ for each week of leave that is taken.

Under the Employment Rights Act 1996, where an employee has normal working hours ‘a week’s pay’ is simply the normal remuneration that they receive each week.  However, if an employee does not have normal working hours, which results in their remuneration varying from week to week, then ‘a week’s pay’ will be calculated by taking an average over the previous 12 week   period.

The recent cases on holiday pay have all considered how ‘a week’s pay’ should be calculated and what payments fall within ‘normal remuneration’.

In one of the most recent cases, Bear Scotland, the EAT considered whether overtime payments should be included when calculating a week’s pay for the purposes of statutory holiday pay.

The EAT held that an employee should receive their ‘normal remuneration’ during leave.  ‘Normal remuneration’ should include overtime payments where the employee is obliged to perform overtime whether or not the overtime is guaranteed by the employer (‘compulsory overtime’).  It is still uncertain as to how overtime which the employee is not obliged to perform (‘non-  compulsory or voluntary overtime’) should be treated.

The other significant part of the Judgment was that an underpayment of holiday pay (because overtime was not included in the calculation) can be treated as a series of deductions.  Thus, an employee could make a claim for historical underpaid holiday pay.  However, the EAT has limited the historical claims by deciding that where there was a gap of more than three months between deductions, this would break the series of deductions.  This point is being appealed to the Court of Appeal.

In response to the concerns raised by businesses regarding historic claims for underpayment of holiday pay, the Government has published draft Regulations which will come into force shortly.  The draft Regulations will impose a cap of two years on claims for certain types of unlawful deductions, including holiday pay.  The cap will apply to claims made on or after 1st July 2015.

A further complicating factor is that this ruling on overtime only applies to pay in respect of 4 weeks leave (a full time UK employee is entitled to 5.6 weeks leave).  This is because the European Directive only gives a right for employees to take 4 weeks leave.  The additional 1.6 weeks which UK employees are entitled to is a domestic right and is therefore not covered by this ruling.

If your business is or may be affected by this ruling there may be steps you can take to limit exposure for both past and future liabilities.

Obesity may constitute a disability

In a recent case the European Court of Justice considered whether obesity would fall within the   meaning of ‘disability’.  It held that, whilst there was no prohibition under EU law against discrimination on grounds of obesity, some of the health consequences of severe obesity may constitute a disability.

In this case, a Danish child minder who has a BMI of 54, brought discrimination proceedings claiming he was dismissed by his employer due to his obesity.

The European Court of Justice held that obesity may constitute a disability if it ‘entails a limitation that hinders a person’s full and effective participation in professional life on an equal basis with other workers’.  Therefore, it is not the obesity itself that is a disability but rather the consequences, such as problems in mobility or depression.

Whether obesity constitutes a disability will depend on the severity of the condition and the facts in each case.  The more severe the condition, the more likely it is that it will impact on a person’s health in a way that will constitute a disability.  It is irrelevant whether the obesity was caused by excessive food intake or a metabolic or physiological problem.

Shared Parental Leave

A new regime, which will replace Additional Paternity Leave, will come into effect for employees whose baby is due on or after 5th April 2015.

Under the new regime a mother, subject to meeting the eligibility criteria, will be able to convert up to 50 weeks of her maternity leave into Shared Parental Leave (‘SPL’) which can then be shared with her partner.  SPL will mean much more flexibility as it allows the mother and her partner to take SPL either together or separately and they can chose to take it in one block or split the leave into a number of separate blocks.

Under the SPL regime, a mother must still take a minimum of two weeks compulsory maternity leave (four weeks for factory workers) after the baby is born.  She can then, is she chooses, covert the remainder of her maternity leave entitlement into SPL.  In addition, a mother can also covert up to 37 weeks of her statutory maternity pay into shared parental pay.

The rights to maternity leave and ordinary paternity leave will remain the same.

We will shortly be publishing a full Guidance Note on Shared Parental Leave once the Government has finalised all of the legislation.  In the interim, if you would like advice on dealing with Shared Parental Leave or drafting a Shared Parental Leave Policy please contact Kathryn Meir in our Employment Team.

Pre-termination negotiations

Since July 2013 an employer has been able to undertake discussions with an employee, before termination of employment, with a view to agreeing exit terms without an employee being able to rely upon those discussions in Employment Tribunal proceedings for ordinary unfair dismissal claims unless the employer has behaved improperly.

Put simply, and by way of example, in cases where an employee has protection from unfair dismissal (after, say, 2 years’ continuous employment) this procedure has been used successfully by many of our clients to enable them to essentially negotiate “without prejudice” and agree sensible exit terms with employees, avoiding the difficulties and disruption caused by “performance improvement plans” and lengthy disciplinary proceedings.

The pre-termination procedure is a useful aid in an employment lawyer’s armoury but it must be used with skill and care.  Our Employment Team is experienced in guiding clients in the use of this procedure.


The comments in this note are of a general nature only.  Full advice should be sought on any specific problems or issues.


Christopher Gigg  [email protected]  +44 (0)115 934 3310

Kathryn Meir [email protected] +44 (0)115 934 3308