Speaking at Eversheds’ annual food and drink conference in London, Kate Dodd, principal associate at the legal giant, told delegates: “This year has been particularly busy because of holiday pay – it’s a huge issue for a lot of clients in the food and drink sector.
“One client is asking how they are going to remain solvent because of a huge potential liability from holiday pay claims.” Some businesses were potentially facing claims totalling millions of pounds, she told FoodManufacture.co.uk.
Recent rulings had made the situation particularly complicated for food manufacturers, because they allowed aspects such as overtime and shift allowances to be taken into account when calculating average holiday pay, said Dodd. Commission and travel expenses can also be considered.
Both are relevant to production line workers in factories, especially during spikes in demand, and mean even staff whose holiday pay is up to date are eligible to make claims.
Claims can also be retrospective, meaning even people no longer employed by businesses could sue for compensation for unpaid shift allowances backdated for up to six years.
In addition, said Dodd, recent case law suggested that “anything which could be seen to discourage people from taking holiday pay should be unlawful”.
If employees would normally have been required to work, and therefore be paid for, overtime or extra shifts, they could claim similar pay even when on holiday, she explained.
She said the correct reference period for averaging pay was also still unclear.
In addition, according to the letter of the law, average holiday pay should not take account of voluntary overtime. But often it was difficult to determine how ‘voluntary’ such overtime was if staff felt they could endanger their jobs if they refused to work the extra hours, said Dodd.
“A lot of my clients are saying, ‘our overtime is purely voluntary’. One thing I would say is: is it truly voluntary? What happens if I say no?
“I told one client to have a chat with shift supervisors and they came back and said, ‘I think we have a problem here’.”
At the moment, statutory EU holiday time of 20 days is being used to calculate outstanding pay, rather than the UK’s 28-day period.
Dodd warned employers to be forearmed by prioritising an audit of working practices, collating evidence of contractual terms and collective agreements. They should also keep on top of the latest relevant legal cases, assess liability and discuss making provision for claims at board level.
Some companies might fear that trade unions would add to their woes in this area, but they were actually acting as a stabilising influence, she said.
They realised huge legal claims could make companies insolvent, leading to their members losing their jobs, so as a result, they were prepared to negotiate a compromise over claim amounts. In addition, unions often did not have the money to launch lawsuits.
By contrast, civil claims brought by groups of workers or individuals could be more dangerous, as often claimants had less idea of how vulnerable companies were.
GMB trades union members at United Biscuits’ Jacob’s biscuit factory at Aintree launched industrial action in a dispute over holiday pay and fears of outsourcing production last month.