After years of various holiday pay issues being determined in the tribunals, you’d be forgiven for thinking there surely can’t be another one, but you would be wrong!
The most recent matter to be considered by the Employment Appeal Tribunal (EAT) was whether, in bringing a claim for unpaid holiday pay, a claimant could also claim interest on any award made in respect of this.
The facts
This issue arose in Main v SpaDental Ltd, which also considered separate points of law relevant to bankruptcy that are not covered here.
Mr Main brought a claim for six years of unpaid holiday pay, arising out of a dispute over his employment status. Mr Main successfully claimed that he was a “worker” of SpaDental and was therefore entitled to holiday pay. Over a six-year period, his claim amounted to a significant sum in the region of £83,500. Mr Main also claimed a further amount of approximately £42,000 in interest.
The law
Mr Main brought his claim under regulation 30 of the Working Time Regulations 1998 (WTR). Very broadly speaking, regulation 30 states that workers have the right to bring a claim against the employer where it has failed to pay all or part of their leave entitlement and that where a tribunal makes an award of compensation, the amount shall be such as the tribunal considers “just and equitable” without any upper limit.
What the Employment Tribunal (ET) found
Allowing Mr Main’s claim for the unpaid holiday pay, the ET also accepted that regulation 30 did not specifically prevent an award for interest being made but found, in this case, that it was not “just and equitable” to award the same. Mr Main appealed to the EAT against decision not to award interest.
What the EAT decided
The EAT held that there is no provision in the WTR that allows for an award of interest to be made on any compensation awarded under the WTR. This meant that Mr Main could not claim interest on the compensation awarded to him in respect of his unpaid holiday claim.
However, the EAT further decided that the wording of regulation 30 is such that a tribunal is not actually prevented from making an award which effectively compensates for any financial implication arising from a delay in sums being paid. The EAT went on to say that while this cannot be interest, it could be categorised as “interest like compensation” and a relevant factor to be considered must be the question of any loss caused by the delay in not receiving payment when it was due. In Mr Main’s case, there was a six-year period of holiday pay not being paid when it should have been.
The case has been remitted back to the ET to consider the question of loss caused to Mr Main by “effluxion of time”. In order words, the ET must assess the value of loss caused by the fact that Mr Main was not paid in respect of his holiday entitlement over a six-year period.
What now?
While the decision as to whether Mr Main will actually be awarded “interest-like compensation” remains to be seen, it’s important for employers to assess their arrangements when it comes to “non-employees” working in their business.
If there are situations where somebody could successfully claim they are a worker or an employee, they would be entitled to holiday pay and potentially now also be entitled to “interest-like compensation” on any award made.
Where any such claims might involve only a short period of time, then awards (both for compensation and interest-like compensation) may not be significant, but if the non-payment spans a longer period, awards for “interest-like compensation” could be substantial.
Employers that engage staff where there could be a question about employment status need to be aware that their financial exposure in these circumstances isn’t necessarily limited to holiday pay. Depending on how the ET assesses the question of loss in considering whether to award interest-like compensation, employers might potentially find themselves having to compensate where the worker might have gotten into debt with credit cards or loans or has incurred charges and penalties arising from missed payments.
The point is, employers rarely know the full extent of a worker’s personal circumstances and if the employer fails to pay sums due over a lengthy period of time resulting in negative financial implications for the worker, the exposure could potentially be considerable. It’s time to assess those arrangements and take steps to limit any damage where the risk is present.
If you’re unsure about your holiday pay arrangements or employee status, get in touch with the Employment team at Glaisyers ETL to assess your risks.
