An Employment Appeals Tribunal has handed down judgement in the much anticipated case of Bear Scotland vs Fulton. The tribunal ruling opens the gates for millions of backdated claims, potentially costing businesses billions of pounds.
In the landmark case, the Employment Appeal Tribunal ruled that employers have been misinterpreting the EU Working Time Directive, and that holiday pay should be calculated with regular overtime included, rather than being based solely on basic salary.
Approximately five million works in the UK currently do overtime. Employees can make backdated claims, but only if it less than three months since their last holiday or incorrect payment.
The Government, as well as business leaders, have spoken out against the changes. Business Secretary Vince Cable has said he has set up a taskforce to assess the implications of the ruling, and the potential harm it will inflict on UK employers.
He said: “Government will review the judgement as a matter of urgency. To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the impact.”
Meanwhile, a business lobby group has expressed dismay at the decision. CBI’s director general, John Cridland, said: “This is a real blow to UK businesses now facing the prospect of punitive costs possibly running into billions of pounds – not all will survive, which could mean significant job losses.”
However, the Unite union, which brought the case, has dismissed their concerns. It said far fewer people would be affected than the “hysterical” claims made by business groups suggested. This might prove to be the case, as the tribunal also ruled out holiday claims from previous years, mitigating a large portion of the initially feared cost.
Regardless of this, many business leaders fear the implications of the ruling could be widespread, with the added financial pressure resulting in a loss of jobs within affected sectors.
“This judgement must be challenged. We need the UK Government to step up its defence of the current UK law,” Mr Cridland said.