U.K.: Government to Review Overtime Ruling

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By Ali Qassim

Nov. 6—The government has announced plans to create a taskforce to consider the consequences of the Employment Appeal Tribunal's landmark Nov. 4 ruling requiring British employers to include overtime in calculating holiday pay.

As previously reported, Judge Brian Langstaff concluded that Article 7 of the European Union's Working Time Directive (2003/88/EC), which the U.K. implemented in 1998 as the Working Time Regulations (WTR), “required non-guaranteed overtime to be paid during annual leave.”

Under current law, employers only include basic pay, not overtime, in calculating annual leave.

The ruling dismissed appeals made by three employers-road maintenance company Bear Scotland, engineering firm Amec and industrial services group Hertel-whose employees had won their original claims in court to have overtime included in their holiday pay.

The judgment marked a victory for Unite, one of the U.K.'s biggest unions, which brought the case to the courts.

“Up until now, some workers who are required to do overtime have been penalized for taking the time off they are entitled to,” Unite executive director for legal, membership and affiliated services Howard Beckett said in a union press release.

‘A Real Blow' to Business?

The government will set up a taskforce to “properly understand the financial exposure employers face” as a result of the ruling, Business Secretary Vince Cable announced Nov. 4.

The taskforce will consist of representatives from government departments and key business lobbies including the Confederation of British Industry (CBI), the manufacturers' organization EEF, the British Chambers of Commerce, the Federation of Small Businesses, the Institute of Directors (IOD), the British Retail Consortium and the Civil Engineering Contractors Association.

CBI director general John Cridland said in a statement that the ruling is a “real blow to U.K. businesses now facing the prospect of punitive costs potentially running into billions of pounds.”

The judgment “must be challenged,” Cridland added, and the government must “use its powers to limit any retrospective liability that firms may face.”

Simon Walker, director general of the IOD, concurred.

“The holiday pay time bomb could have a hugely detrimental impact on businesses up and down the country,” Walker said in a Nov. 3 statement.

Or ‘Scaremongering'?

Trade Unions Congress general secretary Frances O'Grady, however, said that “scaremongering about the possible impact of this ruling is irresponsible.”

“It's worth remembering,” O'Grady said in a statement, that the introduction of the WTR in 1999 “meant that six million people gained more holiday entitlements, and businesses easily absorbed the increase and employment continued to rise.”

To contact the reporter on this story: Ali Qassim in London at correspondents@bna.com

To contact the editor responsible for this story: Rick Vollmar at rvollmar@bna.com

The U.K. Employment Appeal Tribunal's ruling on overtime and holiday pay is available at http://www.employmentappeals.gov.uk/Public/results.aspx?id=8005, Secretary Cable's announcement at https://www.gov.uk/government/news/taskforce-to-assess-judgment-in-holiday-pay-ruling, Unite's press release at http://www.unitetheunion.org/news/unite-secures-ground-breaking-tribunal-victory-over-holiday-pay, John Cridland's statement at http://www.cbi.org.uk/media-centre/press-releases/2014/11/cbi-comments-on-holiday-pay-ruling, Simon Walker's statement at http://www.iod.com/influencing/press-office/press-releases/holiday-pay-timebomb-could-wipe-out-small-businesses and Frances O'Grady's statement at http://www.tuc.org.uk/economic-issues/labour-market-and-economic-reports/labour-market/workplace-issues/holiday-pay-ruling.

For more information on British HR law and regulation, see the U.K. primer.