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Bank Holidays and Breach of Contract
What is the problem? The wording of employees’ contracts…
The way in which the contracts of some employees have been worded might result in a shortfall in their annual holiday entitlement, which their employers would not have expected at the time of drafting. This is because of the variation in the dates of the Easter bank holidays in the next two years.
This is an issue that will only affect certain employers operating an annual leave year that runs from 1st April to 31st March. However, not all such employers will be affected. Only those employers who set out their employees’ paid annual leave entitlement using wording similar to “20 days’ holiday plus bank holidays”.
The Working Time Regulations 1998 provide employees with a minimum of 5.6 weeks’ paid annual leave in each holiday year, which amounts to 28 days’ leave in each year for employees who work five days per week. The 28 days can include bank holidays, of which there are usually eight per year.
In 2016, the Easter break means that there will be bank holidays in England and Wales on 25th (Good Friday) and 28th March (Easter Monday). In 2015, Good Friday and Easter Monday were later, falling on 3rd April and 6th April, respectively.
However in 2017, Easter is even later. Good Friday will be on 14th April, with Easter Monday on 17th April.
This variation in the dates of the Easter holidays means that two Easter breaks fall within a holiday year running from 1st April 2015 to 31st March 2016. There will, therefore, be ten bank holidays in this holiday year. Affected employees, with wording along the lines of “20 days’ holiday plus bank holidays” in their contracts will gain from two additional bank holidays for the leave year.
If an employer fails to honour a contractual clause providing for “20 days’ holiday plus bank holidays”, by not allowing employees to take the extra two bank holidays as part of their paid holiday entitlement, that employer would be in breach of contract. There is no limit on the number of bank holidays that can be taken in each holiday year. It does not matter that there are more bank holidays than usual in the holiday year.
Conversely, looking ahead to the holiday year running from 1st April 2016 to 31st March 2017, employees would appear to lose out. This is because there is no Easter break at all falling during the holiday year, and there will only be six bank holidays. Employees would only be entitled to 26 days’ holiday during this leave year, and this is in breach of the Working Time Regulations 1998, which requires employees to be given 28 days’ holiday per year for an employee working five days per week.
What can employers do?
Unfortunately, employers will not be able to rely on the additional bank holidays in the previous annual leave year to justify giving employees less than the statutory minimum in the next leave year. Employers can allow their employees to take no less than the statutory minimum number of holidays in each leave year, and an annual leave entitlement lower than the statutory minimum cannot be negotiated with employees.
Employers will be left in the position where they have to allow employees to take the two additional bank holidays in the 2015-2016 holiday year. Then, in the 2016-2017 leave year, the annual leave entitlement of employees will need to be increased, so that they are able to take the statutory minimum of 28 days’ holiday.
If employers wished to do so, it would be possible to negotiate with employees to amend their contracts of employment to state that they were entitled to “…eight bank holidays only”, in order to avoid having to allow employees the two additional days on 2015-2016.
However, if employers try to vary the terms and conditions of their employees’ contracts without the agreement of each employee, this would be a breach of contract.
If employers are minded to negotiate with staff over the change to this provision in their contracts, then it is advisable to do this at the earliest opportunity. Given that employees would benefit from being given an additional two days of annual leave, it might be unlikely that they would agree to vary their contracts, and employers may just need to agree to the additional days, and incur the cost of “topping-up” their annual leave entitlement next year.
Care should be taken, however, when negotiating new terms and conditions with existing staff. If the variations cannot be agreed, simply deciding to unilaterally impose the change could lead to claims in the employment tribunal or county court for a breach of contract.