HUNDREDS of workers have lodged legal action against their employers in advance of an expected landmark ruling on how holiday pay is calculated.
A decision by the Employment Appeals Tribunal (Eat) on whether overtime and other allowances should be part of holiday-pay entitlements will also see a rush of workers joining trade unions to become part of group actions against employers, according to legal specialists.
There have also been warnings companies could be forced to cut overtime altogether and issue staff with standard contracts to avoid holiday-pay "extras".
The outcome of cases involving roads maintenance specialist Bear Scotland and other engineering firms are due tomorrow.
The final ruling in the case of British Gas salesman Joe Lock, who took the company to an employment tribunal claiming his commission should be paid on top of his basic salary while he was on annual leave, is also imminent.
The Court of Justice of the European Union has already issued rulings in Mr Lock's favour, saying the EU's Working Time Directive allows for employees to receive work-related benefits while on holiday.
Most UK employers have not included voluntary overtime, bonuses or commission in their calculation of holiday pay and tomorrow's expected ruling will focus on whether voluntary overtime should be included in entitlements, as well as the time limitation for historic claims.
A decision in favour of employees could lead to retrospective claims dating back up to 16 years, while industry experts have warned both rulings could have a huge effect on businesses, with backdated payments running into the millions.
Euan Smith, partner and employment law specialist with legal firm Pinsent Masons, said: "Payroll and HR records will need to be examined to assess exposure to potential claims and likely quantum. Trade unions are already pursuing claims and approaching employers directly to ask for settlement proposals. This decision is likely to encourage more of those claims to be pursued by trade unions, claims management companies and by individual employees.
"In the short term, we may see some employers prohibit overtime or certain types of allowances altogether, opting for a standard set 12-month salary contract giving visibility of cost to the business. The net effect is that overall workforce flexibility could be reduced, meaning significant operational issues."
Mr Lock is a member of Unison and the union said a final judgment in his case and two others tomorrow "could have implications across all sectors of employment".
Katja Hall, deputy director-general of the CBI, said recently: "Businesses that have done the right thing and fully complied with UK law suddenly face the threat of substantial additional costs. The companies most at risk are in vital sectors for our economy, such as manufacturing, construction and civil engineering."
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