Token Payment in Lieu of Accrued Holidays Ruled Unlawful - Expert Comments

Louise Elster
19th Sep 2013

Expert comments on the recent ruling of a token payment in lieu of accrued holidays ruled unlawful.

 

The tribunal followed the increasing practice of dis-applying certain provisions of the Working Time Regulations in order to give the employee an effective remedy against a practice that breaches European law.

 

As a first instance decision, the tribunal’s judgment is not binding on other tribunals and it is possible that the decision may be appealed. However, there is every reason to suspect that a higher court will support the reasoning of the Employment Tribunal in this particular case. Recent European case law clearly suggests that any payment of accrued holiday pay on termination of employment must be equivalent to the payment the employee would have received had they actually taken their accrued holidays.

 

Employers who use contractual clauses providing for a nominal sum to be paid in respect of accrued holiday pay on termination of employment should therefore consider carefully whether to continue enforcing these clauses. If the Employment Tribunal’s decision is correct, it appears unlikely that making a payment of a nominal sum in circumstances where the employee has committed a breach of contract (such as gross misconduct or not working out their notice period) will be any more lawful than having a blanket rule that a nominal payment is made, whatever the reason for termination.

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