Today’s EAT decision on the Bear Scotland vs Fulton case was awaited with bated breath in our office. We were somewhat surprised by the ECJ ruling earlier this year that holiday pay should include commission and overtime, but there was always a question mark over how this would be implemented in the UK.
Well, we now have an answer and it feels like something quite significant has happened. The UK court has ruled that non-guaranteed overtime forms part of ‘normal pay’ and therefore should be included in holiday pay calculations.
This decision has serious implications for employers, and the financial and administrative impact could be huge. Many employers will see this as a call to action to amend holiday and overtime policies and processes, and to redesign variable pay schemes such as sales commission as well.
The concern that backdated claims would reach back as far as 1998 (when the UK Working Time Directive was first introduced) has been unfounded with the ruling that claims are likely to be limited to the previous leave year, and possibly just the previous three months.
It is hardly surprising that this decision has grabbed the attention of many UK business groups, with the CBI lobbying the Government for legal change:
"This judgment must be challenged. We need the UK Government to step up its defence of the current UK law, and use its powers to limit any retrospective liability that firms may face."
What is absolutely clear is that employers should take action now and as a minimum ensure that relevant data is being recorded and stored, the risk of claims assessed, and the impact of potential changes to holiday calculations quantified.
An appeal is almost certain meaning a final decision from the Court of Appeal is potentially years away. But many will feel that the writing is already on the wall and, as a consequence, there’s some important work to be done.
