He is setting up a taskforce to assess the possible impact of the ruling on holiday pay which has emerged from the Employment Appeal Tribunal.
The taskforce will consist of a selection of government departments and business representative groups. The taskforce will provide a forum to discuss how the impact on business can be limited.
Business Secretary Vince Cable said: "Government will review the judgment in detail as a matter of urgency. To properly understand the financial exposure employers face, we have set up a taskforce of representatives from government and business to discuss how we can limit the impact on business. The group will convene shortly to discuss the judgment."
Overtime payment should be used to calculate holiday pay, a landmark decision has concluded. The Employment Appeal Tribunal has held that Article 7 of the Working Time Directive is to be interpreted such that payments for overtime which the employees in two appeals before it were required to work, though which their employer was not obliged to offer as a minimum, is part of normal remuneration and should be included in the calculation of pay for holiday leave.
The appeals arise in test cases concerning the calculation of holiday pay. The appeal by Bear Scotland is against a decision by Employment Judge Kearns, in Glasgow, who found that Bear Scotland, which carries out road construction and maintenance, had made unauthorised deductions from the wages of two employees, by failing to include overtime and other payments associated with their work.
Speaking for the Federation of Small Businesses, Andy Willox, the Scottish policy convener, said: "The ruling leaves questions unanswered for smalls firms across the length and breadth of Scotland. It has the potential to hurt thousands of Scottish businesses, presenting a real risk of closures and job losses if they face large retrospective claims. Clearly it would be desperately unjust to expect Scottish businesses to pay retrospective compensation for how they calculated holiday pay when they were fully compliant with the law as it was understood at the time.
"The FSB has been appointed to a UK Government taskforce to examine this issue and will be fighting hard for small businesses to be insulated from the uncertainty and legal risks this ruling brings."
Innes Clark, head of employment law at Morton Fraser, said: "Affecting a large cross section of UK employers in the private and public sectors, the ramifications of this ground-breaking ruling could result in significant costs affecting an estimated 400,000 firms. Many large employers have been gearing up to deal with this issue with some already facing employment tribunal claims. The issues which they face and the tactics that are being adopted depend on the employer's particular circumstances."
"The decision will almost certainly be appealed and it is likely to take several years to finally resolve. However, many employers recognise that they will need to try and deal with this issue well before the protracted litigation is concluded."
Malcolm Mackay, the chairman of Edinburgh-based United Employment Lawyers, a network of 35 Scottish law firms, said: "This ruling will have a major impact on firms across the UK - especially if there is a challenge over back pay. The whole issue has thrown employment law into the spotlight and onto the front pages. I can see why this might be a major concern for business."
Glenn Hayes, an employment law partner at Irwin Mitchell, said: "There was considerable concern that today’s decision could lead to thousands of claims for backdated holiday pay, possibly going back 16 years. This looks to be unlikely because the Appeal Tribunal appears to have shut down the argument that employees could back date claims on the basis that they had suffered a series of deductions from their wages when taking holiday albeit there remains some uncertainty as to what denotes a ‘series’ and how this can be broken.
"These rulings represent a major blow to some UK companies and could cast a huge shadow over the wider economy. If that wasn’t bad enough news for business, it is widely anticipated that employers will also have to include commission payments in holiday pay calculations after a similar case (Lock) is decided in February 2015.
Employers and workers can also contact the Acas helpline for free and confidential advice.
In the judgment the UK Employment Appeal Tribunal decided that holiday pay should reflect non-guaranteed overtime.
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