Public holidays – did you get it right?

As I type, Easter is looming and with it, the prospect of Easter eggs and hot cross buns. Of course, when you read this, Easter will probably be a memory – just how distant is likely to depend on how much work has piled up on your desk during those two extra days off.

For an employment lawyer, Easter means public holidays. Even though Easter has passed, the reciprocal obligation of good faith which is contained in the Employment Relations Act 2000 requires the parties to an employment relationship to be, amongst other things, responsive and communicative. Accordingly, if an employer discovers an error in their actions, for example in calculating holiday pay, they ought to act promptly to rectify it. In practical terms this means it isn’t too late for employer clients to check they are in fact complying with their obligations under the Holidays Act 2003.

The basics
The Holidays Act 2003 provides an entitlement to 11 specified public holidays, where those specified days fall on days that would otherwise be working days for an employee. Good Friday and Easter Monday come within that list of specified public holidays and are observed on the day on which they fall (Easter Sunday, despite being a day on which there are restrictions on trading, is not a public holiday). That means if an employee usually works Monday to Friday, and the place in which the employee works is not open on the public holidays or the employee is not required to work, the employee is entitled to be paid his or her relevant daily pay for that day. Relevant daily pay is what the employee would have received if he or she had worked.

If the business is open that day and the employee is required to work, he or she must be paid no less than time and a half for any hours worked. The employee also becomes entitled to an alternative holiday, to be taken at a time to be agreed between the employer and the employee. If the parties cannot agree on the timing for the taking of the alternative holiday, the employer can direct when the alternative holiday is taken, on 14 days’ notice to the employee.

An “alternative holiday” is a full day off work, regardless of the hours worked by the employee on the public holiday. It is also important to bear in mind that an alternative holiday, or indeed any form of leave, can only be taken on a day that would otherwise be a working day for the employee. It is inherent in the concept of leave that it is leave from something – namely work. This means that an employee can’t ask to have their alternative holiday or any other leave day paid on a day on which they would not otherwise work, and neither can an employer require an employee to do so.

The only exception to this rule is that if an alternative holiday is not taken within 12 months, an employee can ask to cash up the alternative holiday. The wording of section 61 of the Holidays Act includes “where the employer agrees to the employee’s request”. Accordingly, it is clear that it is discretionary and an employer is not obliged to agree to a request to exchange an alternative holiday for payment.

Section 61 also states that where the employer agrees to the employee’s request, the employer must pay the employee the amount agreed for the alternative holiday. On a first glance reading this appears to leave open the ability for the parties to agree a payment less than the employee’s relevant daily pay. However, the Holidays Act is a minimum code and the parties cannot contract out of their entitlements and obligations under it. Against this background, it is difficult to see how any lesser payment could be lawful. In any event, if the employer offers a lower payment amount, the employee is not obliged to agree and can instead elect to take the alternative holiday.

Transferring public holidays and cashing up leave entitlements
It is worth bearing in mind that amendments to the principal legislation now allow the employer and employee to agree in writing to transfer the observance of all or part of a public holiday to another day. This amendment was introduced with effect from 1 April 2011 and its intent is to give shift workers, and employers in industries that operate shifts, greater flexibility. Interestingly, the Act also allows an employer to adopt a policy of not agreeing to transfer all or part of public holidays. Further, such a policy can apply across the employer’s entire business or across just part of it.

Another amendment that took effect from 1 April 2011 is the ability for an employee to request that a portion of his or her accrued annual leave entitlement is paid out/cashed up. A request must be made in writing and an employee can make one or multiple requests up to a total of one week’s annual leave per annum. Anecdotal evidence suggests that most employee requests are for a week’s annual leave to be paid out as a lump sum.

This applies to the statutory entitlement to annual leave. Accordingly, if an employer provides an employee with an entitlement to annual leave that is in excess of the statutory entitlement of four weeks per annum, there is nothing to stop the parties agreeing to cash up (or not) that additional entitlement. The point is, this is not covered by the statutory provisions. In respect of the statutory provisions, an employer is free to accept or decline a request to cash up, and does not need to give reasons for any decision to decline.

The key point to remember with annual leave is that the onus is on the employer to ensure that annual leave is being taken and paid correctly. The Holidays Act provides that an employer must keep a holiday and leave record for each employee and the record must be kept for six years from when the information is entered. If an employer is found not to have paid holidays and leave correctly, the amounts can be ordered to be repaid, together with interest. That’s less money for the business (and less for Easter eggs!). 

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