Harpur v Brazel: A Tough Nut to Crack!

2022-10-26

Harpur v Brazel:

The facts: permanent term-time only zero-hours contract for ad hoc music tuition.
- Paid an hourly rate for the hours worked each term.
- Annual leave entitlement specified as 5.6 weeks to be taken in three equal tranches of 1.87 weeks in school holidays at the end of each term.
- Argued miscalculation of holiday pay entitlement.
- Claimed unlawful deduction from wages claim.
- Claim to the ET with appeals up to the Supreme Court.

Harpur Trust: The Percentage Method
- Holiday pay paid at hourly rate for 12.07% of hours worked in previous term.
- Based on the proportion that statutory leave bears to the working year in the case of a hypothetical full-time worker.
- So, as a percentage that’s the holiday entitlement of 5.6 weeks ÷ 46.4 working weeks = 12.07% of paid working time.

Mrs Brazel: The Calendar Week Method
- Wrong! Correct entitlement is for ‘a week’s pay’ for each of the 5.6 weeks.
- Working Time Regulations (WTR) 13 and 13A are clear - 5.6 annual leave weeks for all permanent workers.
- WTR 16 also clear – each week to be paid at the rate of a week’s pay.
- Employment Rights Act 1996 (ERA) sets out the rules for calculating ‘a week’s pay’ depending on whether the worker has normal working hours or not.

Supreme Court (SC) judgement - July 2022:
- Agreed with Mrs Brazel.
- The 12.07% figure was always a “mathematical abstraction” and never figured in the WTR or the ERA, which express leave in weeks.
- All workers with permanent contracts are entitled to 5.6 weeks paid statutory annual leave whether they work part of the year, or all of it.
- A week’s pay must be calculated according to the rules in the WTR and ERA.

Is it fair?
- The Trust’s argument: an absurd result - where a part-year worker receives holiday pay which can be a far higher proportion of their annual pay than a full-year worker.
- SC: Absurdity was unlikely to be Parliament’s intention but, “we do not regard any slight favouring of workers with a highly atypical work pattern as being so absurd as to justify the wholesale revision of the statutory scheme.”
- ‘Fair or not’ was never the question.
- The law is the law and the WTR and ERA set out correct method for calculating holiday pay entitlement.

Term-Time Only Support Staff:

The Green Book:
- Part 4.12 Term-Time Only Employees.
- Section 6: Advisory Model Calculation – revised in 2019 following EAT ruling in Harpur v Brazel in March 2018.
- Still applies the Percentage Method based on - the proportion contractual leave bears to the working year in the case of a full-time worker.
- This usually produces paid holiday entitlement exceeding the 5.6 weeks statutory entitlement – therefore “Brazel compliant.”
- But not always – see example in section 6 of the Green Book.

A Week’s Pay:
- Calendar Week Method in the WTR and sections 221 to 224 of the ERA.
- Different rules depending on the worker’s working patterns.

TTO Support Staff:
- Paid salary for TT weeks worked with holiday pay for some, but not all, of the school holidays.
- Normal working hours which differ over a period of time so that pay in some weeks varies: Section 222 ERA applies.

Calculating a week’s pay:
- Average weekly pay over a 52-week reference period (backstop of 104 weeks).
- So, it’s: remuneration payable for time worked ÷ by number of weeks for which the pay is apportioned, ignoring any weeks when no remuneration was payable.

Aggregated salary and holiday pay:
- Combined salary and holiday pay - paid in 12 equal monthly instalments throughout the year.
- How does fit with the formula in section 222?

Court of Appeal - Pragmatic approach:
- Agard v Westminster Kingsway College [2011] (following Gilbert & Ors v Barnsley BC [2002]) – binding authorities.
- Cases concerned calculating a week’s pay for statutory redundancy purposes - equally relevant for calculating a week’s statutory holiday pay.
- ‘A week's pay’ must be calculated on the basis of the remuneration being apportioned to those weeks during which the worker was either working, or for which pay was apportioned as holiday pay.
- In Miss Agard’s case she worked 40 weeks a year and was paid for an additional 5 weeks. There was no pay apportioned to the remaining 7 weeks of the year. The correct “denominator” (in other words the number of weeks that her annual combined salary should be divided by to reach ‘a week’s pay) was 45 not 40 (and not 52, as was argued by the employer in the Gilbert case).
- A week’s pay is then multiplied by 5.6 to determine statutory holiday pay.
- Testing for “Brazel compliance” can be quite a test!

Casual Staff and Zero-Hours Contracts:

Mrs Brazel:
- Permanent zero-hours contract.
- Calendar Week Method is correct.

A Week’s Pay:
- No normal working hours: Section 224 ERA applies.

Calculating a week’s pay:
- Average weekly pay over a 52-week reference period (backstop of 104 weeks).
- So again, it’s: remuneration payable for time worked ÷ by number of weeks for which the pay is apportioned, ignoring any weeks when no remuneration was payable.

In practice:
- Looking back 104 weeks (2 years)
- ‘Weeks that count’ are weeks when remuneration is payable for work done.
- Worker A and Worker B both work a total of 600 hours over the 2-year period and earn £12,000 each.
- Worker A worked those hours over 20 weeks – that’s 20 weeks that count.
- Worker B worked those hours over 40 weeks – that’s 40 weeks that count.
- Worker A’s average weekly pay is £12,000 ÷ 20 = £600.
- Worker B’s average weekly pay is £12,000 ÷ 40 = £300.
- Worker A’s statutory holiday pay is 5.6 x £600 = £3,360.
- Worker B’s statutory holiday pay is 5.6 x £300 = £1,680.
- The “denominator” is the number of weeks that count. Increasing the number of weeks that count reduces the average for a week’s pay and accordingly the amount of statutory holiday pay entitlement.

The exam invigilator problem:
- “Windfall” holiday pay! Working only a few weeks a year can result in significant holiday pay entitlement (small denominator).
- An exam invigilator working two 30-hour weeks, and paid £600 each week, will be entitled to a total salary of £1,200 for hours worked.
- The exam invigilator’s statutory holiday pay is 5.6 x (£1,200 ÷ 2) = £3,360.
- Where those 30 hours are worked over six weeks the exam invigilator’s statutory holiday pay is 5.6 x (£1,200 ÷ 6) = £1,120.
- Again, it is easy to see that increasing the number of weeks that count (the denominator) reduces the average for a week’s pay and accordingly the amount of statutory holiday pay entitlement.
- The Supreme Court agreed that odd results were produced in extreme cases, such as the exam invigilator. But said that, “general rules sometimes provide anomalies when applied in untypical cases and it would be unusual for a worker whose services are only required for a few weeks a year to be engaged on a permanent contract unless there was some other good reason to do so.”

Claims and Limitations:

Claims during employment:
- WTR - unpaid (or underpaid) holiday pay.
- Unlawful deduction from wages.
- Both three months from the date of payment of the wages from which the deduction was made (which will usually be the relevant payroll date).

Series of Deductions: How far back can a claim go?
- No series of deductions for WTR claims, only for unlawful deductions claims.
- Bear Scotland (EAT):
  - must be a factual and temporal link between the deductions
  - gaps of more than 3 months will break the series.
- Pimlico Plumbers (Court of Appeal):
  - Strong view that Bear Scotland was wrong!
  - “Each unlawful deduction was factually linked by the central vice that holiday pay had been miscalculated.”
- Backstop of two years: Deduction From Wages (Limitation) Regulations 2014.

WTR claims on termination:
- WTR Regulation 14 - on termination of employment, a worker is entitled to pay in lieu of unused statutory holiday from their final leave year.
- 3-month limitation from termination date to bring a claim.
- King v Sash Windows (CJEU):
  - Can carry over of holiday pay entitlement where leave untaken because the worker was discouraged from taking it because it would have been unpaid.
- Pimlico Plumbers (Court of Appeal):
  - Carry over of holiday pay entitlement where leave taken but it has been unpaid.
- Neither case addresses the situation where holiday is taken but underpaid.
- Unlikely to apply to Harpur v Brazel claims as no discouragement from taking annual leave due to it being unpaid.
- But we shall see….

In a Nutshell:

All workers with a permanent contract are entitled to 5.6 weeks paid statutory annual leave at the rate of a week’s pay for each week of leave.

Practical Steps:
- Holiday pay audit:
  - Claim quantification looking backwards.
  - Crunching the numbers.
- Contract review:
  - Claim limitation going forwards:
    - Consider fixed term assignments.
    - Consider engaging casual workers on a self-employed basis.
    - Consider specifying when annual leave is to be taken.
  - Beware issues around:
    - Umbrella contracts/continuity of employment.
    - Terminating/varying contracts.
    - Possibility of claims for breach of contract and unfair dismissal.
    - Part-time Workers (Protection from Less Favourable Treatment) Regulations 2000.

The future:
- Retained EU Law (Revocation and Reform) Bill 2022
- All secondary legislation derived from EU law (that includes the WTR) will be “sunsetted” on 31 December 2023 unless it has been assimilated into UK law.
- Judges in the higher courts will have discretion to disregard (ignore) case law derived from EU law.
- WTR likely to be largely assimilated into UK law but can be reformed.
- Week’s pay provisions in ERA arise from primary legislation and not affected.
- Harpur v Brazel does not derive from EU law; it’s here to stay!

In conclusion:

Dealing with Harpur v. Brazel in practice is not easy and means weighing up legal risk, administrative workability, cost and perceived fairness and consistency between staff with varying working patterns. Definitely a tough nut to crack!