Reversing the Harpur Trust v Brazel ruling and other employment reforms

The government consulted earlier this year over several proposed employment reforms, including:

• Simplifying annual leave, pay calculations, and record keeping, under the Working Time Regulations (WTR)
• Amending consultation requirements under the Transfer of Undertakings (Protection of Employment) Regulations 2006 (TUPE).

The government has now confirmed the reforms it plans to take forward as a result of its consultations, and has published the draft Employment Rights (Amendment, Revocation and Transitional Provision) Regulations 2023 (the “draft Regulations”), which will come into force on 1 January 2024.

The reforms are summarised below, and most significantly for schools, include the reversal of the 2022 Supreme Court decision in the Harpur Trust v Brazel (Brazel) ruling.

Holiday entitlement and pay: Harpur Trust v Brazel and rolled up holiday pay

Schools will be familiar with the judgment of the Supreme Court in July 2022 in the case of Brazel. The case confirmed that holiday entitlement for permanent part-year workers should not be pro-rated to that of a full-time worker. The background to the case and our detailed note on the Supreme Court judgment can be found here.

The judgment resulted in part-year workers being entitled to a greater holiday entitlement than part-time workers who work the same number of hours over the course of the year. On 12 January 2023, the government, seeking to address this disparity, launched a consultation “seeking views on proposals to pro-rata holiday entitlement for part-year and irregular hours workers based on the annual hours they work”.

Further to the consultation, the draft regulations make several changes to holiday arrangements for those working irregular hours, or for only part of the year:

• They allow an employer to calculate holiday accrual for such workers at a rate of 12.07% of hours worked in a pay period. This reverses the decision in Brazel and returns the position to that adopted by most schools prior to the Supreme Court judgment
• They allow an employer to pay rolled-up holiday pay, a practice where a worker’s hourly rate is enhanced to incorporate an element for holiday. This practice is currently unlawful as it does not allow staff to be paid while they are on leave but will be permitted under the draft regulations. Rolled up holiday pay will need to be calculated using the worker’s total earnings over the relevant pay period.

Although the draft regulations will come into force on 1 January 2024, the changes to holiday arrangements will only come into effect for holiday years beginning on or after 1 April 2024. Therefore, where a school operates a holiday year that accords with the academic year, the changes will not be relevant until September 2024.

The changes apply to workers with irregular hours and those who only work part of the year, and do not affect how holiday entitlement should be calculated for those working regular hours.

Record-keeping under the WTR

In addition to the changes regarding holiday pay, the government has confirmed that it will address the current requirement, imposed as a result of European case law, to record all daily working hours of all workers. Instead, employers will simply be required to keep “adequate” records that demonstrate compliance with the WTR.

The Health and Safety Executive will publish updated guidance on record keeping requirements in due course.

TUPE

With regards to TUPE, the government has confirmed it will introduce changes to the consultation obligations so that, where there are no existing employee representatives, businesses will be entitled to consult directly with employees:

• Where the business is small with less than 10 employees in total
• Where the transfer impacts less than 10 employees.

These changes will apply to TUPE transfers which take place on or after 1 July 2024.

What does this mean for schools?

The changes, especially those relating to holiday calculations, will be welcomed by schools.

The impact will, however, differ depending on the approach taken following the Brazel ruling. For those schools that did not make changes following the decision, the reforms may provide scope for a continuation of current arrangements without exposure to claims for unpaid holiday pay. However, where changes have been made, any proposal to amend the holiday pay calculation may result in a contractual change to the terms of employment and will need to be carefully considered.

Each case will be dependent on its specific circumstances and schools should seek legal advice to inform their strategy.

In relation to new starters, from 1 January 2024 onwards, schools will have a greater degree of flexibility in terms of how they calculate holiday entitlement, and pay holiday pay, for those working irregular hours or for only part of the year, for example zero-hours staff. Again, schools should seek legal advice to ensure compliance with the reformed position.

We will of course keep schools updated on any further developments in advance of January 2024, and once the changes come into force.

If you have any queries or wish to discuss this, we would be happy to assist. Please contact Rachel Parkin or Oliver Daniels, or your usual contact in the team.