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As we start the summer holidays, the Supreme Court’s judgment on holiday pay is a timely reminder of the complexities of calculating holiday pay for certain workers.

Holiday pay has been a hot topic in UK employment law over recent years, with the latest Supreme Court decision in Harpur Trust v Brazel addressing the calculation of pay for workers who work irregular hours for part of the year on permanent contracts. Dismissing the appeal, the Supreme Court agreed with the earlier decisions that holiday pay should not be pro-rated, but instead calculated by looking at average earnings over the relevant reference period prior to leave being taken, even if it meant that the worker received proportionately more paid holiday than a full time worker.Continue Reading Holiday Pay: the latest instalment

2021 marks the start of a new era for the UK, the Brexit transition period having ended at 11pm on 31 December 2020. After endless rounds of negotiation, the parties reached a last-minute agreement over the ongoing relationship between the UK and EU, and the European Union (Future Relationship) Act 2020 (which gives legal effect in the UK to the agreements reached) received royal assent on 30 December 2020. But what impact does this have on UK employment rights derived from the EU?

The short answer is that while Brexit provides the UK with some freedom to deviate from EU derived employment law, we should not expect to see any radical changes to UK employment laws or employment rights.

The Trade and Cooperation Agreement reached between the UK and EU incorporates level playing field commitments that seek to prevent either the UK or the EU gaining a competitive advantage in a variety of contexts. These include rights at work, namely fair working conditions, employment standards (including in respect of workplace health and safety), information and consultation rights and the restructuring of undertakings. The commitments given by both the UK and EU are intended to ensure that neither will weaken or reduce labour or social rights and standards below the levels in place at the end of the transition period where this affects trade or investment between the UK and EU, including by way of a failure to enforce those laws and standards.
Continue Reading Implications of Brexit for UK employment law

In an eagerly awaited decision, the Supreme Court gave its judgment on the meaning of wording commonly used in non-compete post-termination restrictions and the possibility of severing such wording where it would otherwise render such a restriction unenforceable.

Background

Ms Tillman was the Joint Global Head of Financial Services of executive search and recruitment firm Egon Zehnder at the time she left its employment. Her employment contract included a noncompete post-termination restriction of six months’ duration. This noncompete post-termination restriction provided that Ms Tillman would not “directly or indirectly engage or be concerned or interested in any business carried on in competition with any of the businesses” of Egon Zehnder with which she had been materially concerned in the period of 12 months prior to her employment ending. This restriction became contentious and the subject of substantial litigation when Ms Tillman made known her intention to work for a competitor in apparent breach of the non-compete restriction.

Egon Zehnder brought proceedings to enforce the non-competition covenant and successfully obtained an injunction against Ms Tillman. Ms Tillman appealed this decision, arguing, among other things, that the covenant was void on the basis that it was too widely drafted. In particular, Ms Tillman argued that the use of the words “interested in” prevented her from holding even a minority shareholding in a competitor and the restriction was therefore void as an unenforceable restraint of trade. The Court of Appeal agreed and set aside the injunction. Egon Zehnder then appealed to the Supreme Court.Continue Reading Positive news for employers wishing to enforce post-termination restrictions

Does pay for regular voluntary overtime need to be included in the calculation of holiday pay? Yes, says the Court of Appeal in a decision which confirms several prior Employment Appeal Tribunal (EAT) decisions that the entitlement to holiday pay under the Working Time Directive (WTD) must include pay for regular voluntary overtime. As we explain below, the outcome is more complex in practice as tribunals will now have to decide, on a case-by-case basis, whether a particular pattern of voluntary overtime is sufficiently regular and settled to fall within the category of regular voluntary overtime.

Background

Under article 7 of the WTD, EU member states must ensure that workers have the right to at least four weeks’ paid annual leave. The WTD does not expressly specify how statutory holiday pay is to be calculated. However, it is well established that holiday pay should equate to ‘normal remuneration’. Normal remuneration has been interpreted to include not only basic salary but also remuneration which is intrinsically linked to the tasks the worker regularly performs.

The EAT held in Bear Scotland v. Fulton and others that compulsory non-guaranteed overtime (i.e., overtime that is compulsory for the employee if the employer requires it but which is not guaranteed to be provided) must be included in the calculation of holiday pay. The EAT also held, in Dudley Metropolitan Borough Council v. Willetts and others, that holiday pay should correspond to normal remuneration so that workers should not be discouraged from taking their annual leave entitlement; in other words, pay during holidays should not be below the rate a worker would expect to receive had they been working. For a payment to be treated as normal, it should have been made over a sufficient period of time on a regular or recurring basis.

The calculation of holiday pay has also been considered by the European Court of Justice (ECJ), which held in Hein v. Albert Holzkamm GmbH & Co. KG that remuneration received for overtime does not, in principle, form part of normal remuneration. However, where the employment contract requires the worker to work overtime on a broadly regular and predictable basis then that overtime should be included in the calculation of holiday pay.
Continue Reading Court of Appeal: holiday pay must include regular voluntary overtime