Calculating holiday entitlement when working patterns change

In a recent case the ECJ has confirmed that where a worker increases their hours, any statutory leave that has already accrued does not need to be retrospectively recalculated.  Going forward, leave entitlements need to be recalculated in line with the new working pattern but leave taken in excess of the entitlement under the old pattern can be deducted from the entitlement to leave under the new pattern. We summarise the case and look at the practical points to take away.

Background

Mrs G was employed as a care worker with The Care Bureau Ltd (CB Ltd). She was entitled to 5.6 weeks annual leave and the leave year ran from 15 June. Originally she worked part time and her hours differed from week to week.  In her final year with CB Ltd, before she left in May 2013, she took seven days leave.  She took this all in July 2012 which, based on the fact she had worked one day a week in the previous twelve weeks, meant that she had effectively taken 7 weeks leave. Consequently she had exceeded her holiday allowance. From 12 August 2012, she increased her hours (12 days on 2 days off).  She subsequently asked to take more leave but it was refused on the basis she had already exhausted her holiday entitlement. 

Mrs G successfully brought a tribunal claim for pay in lieu of leave not taken but CB Ltd applied to the tribunal for its reconsideration of the judgment. The EAT stayed the appeal pending the tribunal's decision but the tribunal revoked its decision, partly because of a mathematical error and partly to make a referral to the ECJ. Mrs G claimed that her accrued leave should have been recalculated in line with her new working pattern even though the leave had already been taken. CB argued that no such adjustment was required under UK or EU law. 

ECJ decision

In summary the ECJ held that:

• Leave must be calculated by reference to the days, hours and/or fractions of days or hours worked and specified in the contract of employment
• When a worker increases their hours, any statutory annual leave that has already accrued does not need to be recalculated retrospectively to take account of the new working pattern
• Going forward, though, any leave entitlement should be recalculated to reflect the new working pattern. Leave taken in excess of the entitlement under the previous working pattern can be deducted from the leave going forward
• The calculation of leave entitlement is the same whether the employment has terminated or is continuing

Commentary

This is not a surprising decision as it reflects the settled position where an employee reduces their hours and moves from full time to part time hours.  Where hours are reduced it has been held that the leave accrued already but untaken is unaffected.  This is line with the EC Framework Agreement on part-time work, which precludes a worker moving from full-time to part-time from suffering a reduction in his annual leave accumulated but which "he has not been able to exercise while working full time". An example of the full to part time situation is as follows: a full time worker working 5 days a week moves to being a part time worker working 3 days a week part way through the company's leave year and, at the time of the transition, has accrued but not been able to take a week's statutory leave.  So that the worker is not treated less favourably as a result of becoming part time, he should be allowed the accrued week's leave as if he were full time, i.e. 5 days leave not the part time equivalent of 3 days. Entitlement to leave under the new working pattern going forward should be calculated seperately. 

The current decision confirms that the reverse is true where hours are increased. The entitlement to annual leave during the period of reduced hours under the old working pattern does not need to be recalculated.  The ECJ made the point that the purpose of statutory leave is rest from the work under taken under the contract.  Consequently, annual leave should be calculated by reference to the working pattern under the contract.  The entitlement to leave for each period should be considered separately.  A new calculation must be performed for the period during which working time increased but retrospective recalculation was not required here and the employer was entitled to deduct from the leave going forward the leave taken in excess of the entitlement that had applied previously. Greenfield v The Care Bureau Ltd (C-219/14) 11 November 2015

For more information, please contact the employment team at Foot Anstey.